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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-Q/A
                                 Amendment No. 1

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the quarterly period ended November 7, 1998


                                       OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                           Commission File No. 1-13339

                                FRED MEYER, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                            91-1826443
 (State or other jurisdiction of                             (I.R.S. Employer
  incorporation or organization)                            Identification No.)

          3800 SE 22nd Avenue
           Portland, Oregon                                        97202
(Address of principal executive offices)                         (Zip Code)

                                 (503) 232-8844
              (Registrant's telephone number, including area code)


     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 [ ]

     Number of shares of Common Stock outstanding at December 5, 1998:
155,169,609

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

<PAGE>
                                Table of Contents
--------------------------------------------------------------------------------

Items of Form 10-Q                                                          Page

Part I - FINANCIAL INFORMATION

     Item 1   Financial Statements .......................................     3

     Item 2   Management's Discussion and Analysis of Financial Condition
              and Results of Operations...................................    15


Part II - OTHER INFORMATION

     Item 6   Exhibits and Reports on Form 8-K............................    25


Signatures ...............................................................    26


                                       2
<PAGE>


                         Part I - FINANCIAL INFORMATION
--------------------------------------------------------------------------------


Item 1. Financial Statements.
----------------------------

     Consolidated Statements of Income (Unaudited)

<TABLE>
<CAPTION>
                                                                       12 Weeks Ended                  40 Weeks Ended
                                                                ---------------------------     ---------------------------
                                                                November 7,     November 8,     November 7,     November 8,
(In thousands, except per share data)                                 1998            1997            1998           1997
                                                                -----------     -----------     -----------     -----------

<S>                                                             <C>             <C>             <C>             <C>        
Net sales                                                       $ 3,477,091     $ 1,945,543     $11,022,471     $ 4,996,582
Cost of goods sold                                                2,434,961       1,370,439       7,749,272       3,515,612
                                                                -----------     -----------     -----------     -----------
Gross margin                                                      1,042,130         575,104       3,273,199       1,480,970
Operating and administrative expenses                               833,836         488,660       2,668,306       1,272,227
Amortization of goodwill                                             22,930           6,514          66,166           8,269
Merger related costs                                                 31,484               -         237,542               -
                                                                -----------     -----------     -----------     -----------
Income from operations                                              153,880          79,930         301,185         200,474
Interest expense                                                     92,945          30,174         284,720          66,189
                                                                -----------     -----------     -----------     -----------
Income (loss) before income taxes and extraordinary charge           60,935          49,756          16,465         134,285
Provision for income taxes                                           31,771          21,091          46,936          53,655
                                                                -----------     -----------     -----------     -----------
Income (loss) before extraordinary charge                            29,164          28,665         (30,471)         80,630
Extraordinary charge, net of taxes                                     (324)        (91,210)       (217,934)        (91,210)
                                                                -----------     -----------     -----------     -----------
Net income (loss)                                               $    28,840     $   (62,545)    $  (248,405)    $   (10,580)
                                                                ===========     ===========     ===========     ===========
Basic earnings per common share:
  Income (loss) before extraordinary charge                     $      0.19     $      0.24     $     (0.20)    $      0.83
  Extraordinary charge                                                    -           (0.77)          (1.45)          (0.94)
                                                                -----------     -----------     -----------     -----------
  Net income (loss)                                             $      0.19     $     (0.53)    $     (1.65)    $     (0.11)
                                                                ===========     ===========     ===========     ===========
  Basic weighted average number of common
    shares outstanding                                              154,690         118,331         150,601          97,355
                                                                ===========     ===========     ===========     ===========
Diluted earnings per common share:
  Income (loss) before extraordinary charge                     $      0.18     $      0.23     $     (0.20)    $      0.79
  Extraordinary charge                                                    -           (0.74)          (1.45)          (0.89)
                                                                -----------     -----------     -----------     -----------
  Net income (loss)                                             $      0.18     $     (0.51)    $     (1.65)    $     (0.10)
                                                                ===========     ===========     ===========     ===========
  Diluted weighted average number of common and
    common equivalent shares outstanding                            162,127         123,546         150,601         101,562
                                                                ===========     ===========     ===========     ===========
See Notes to Consolidated Financial Statements.
</TABLE>


                                       3
<PAGE>
     Consolidated Balance Sheets (Unaudited)

<TABLE>
<CAPTION>
                                                                  November 7,     January 31,
(In thousands)                                                          1998            1998
                                                                 ------------     -----------
<S>                                                              <C>              <C>        
Assets

Current assets:
     Cash and cash equivalents                                   $    186,045     $   117,311
     Receivables                                                      140,291         108,496
     Inventories                                                    2,007,875       1,240,866
     Prepaid expenses and other                                        60,540          70,536
     Current portion of deferred taxes                                201,001          90,804
                                                                 ------------     -----------
Total current assets                                                2,595,752       1,628,013

Property and equipment--net                                         3,570,974       2,432,040

Other assets:
     Goodwill--net                                                  3,684,442       1,279,130
     Long-term deferred tax assets                                    272,573               -
     Other                                                            170,919          83,753
                                                                 ------------     -----------
Total other assets                                                  4,127,934       1,362,883
                                                                 ------------     -----------
Total assets                                                     $ 10,294,660     $ 5,422,936
                                                                 ============     ===========
Liabilities and Stockholders' Equity

Current liabilities:
     Accounts payable                                            $  1,294,311     $   766,678
     Accrued expenses and other                                     1,007,617         407,167
     Current portion of long-term debt and lease obligations          134,650          19,650
                                                                 ------------     -----------
Total current liabilities                                           2,436,578       1,193,495

Long-term debt                                                      4,999,856       2,184,794
Capital lease obligations                                             173,341          82,782
Deferred lease transactions                                            30,175          38,556
Deferred income taxes                                                       -          83,183
Other long-term liabilities                                           478,492         137,766

Stockholders' equity:
     Common stock                                                       1,550           1,288
     Additional paid-in capital                                     1,895,533       1,173,760
     Notes receivable from officers                                      (335)           (298)
     Unearned compensation                                             (3,236)           (466)
     Retained earnings                                                282,706         528,076
                                                                 ------------     -----------
Total stockholders' equity                                          2,176,218       1,702,360
                                                                 ------------     -----------
Total liabilities and stockholders' equity                       $ 10,294,660     $ 5,422,936
                                                                 ============     ===========
See Notes to Consolidated Financial Statements.
</TABLE>


                                       4
<PAGE>
     Consolidated Statements of Cash Flows (Unaudited)

<TABLE>
<CAPTION>
                                                                         40 Weeks Ended
                                                                 ----------------------------
                                                                  November 7,     November 8,
(In thousands)                                                          1998            1997
                                                                 ------------     -----------
<S>                                                              <C>              <C>        
Cash flows from operating activities:
     Income (loss) before extraordinary charge                   $    (30,471)    $    80,630
     Adjustments to reconcile income (loss)
       before extraordinary charge to net cash
       provided by operating activities:
        Depreciation and amortization of property and equipment       270,039         141,807
        Amortization of goodwill                                       66,166           8,269
        Deferred lease transactions                                    (9,791)         (8,884)
        Merger related asset write-offs                                80,360               -
        Deferred income taxes                                          43,903          (1,140)
        Changes in operating assets and liabilities:
          Receivables                                                  (4,740)        (10,156)
          Inventories                                                (170,119)       (189,050)
          Other current assets                                         12,896          12,780
          Accounts payable                                            198,018         138,750
          Accrued expenses and other liabilities                      (35,515)         (5,953)
          Income taxes                                                 19,628           6,235
        Other                                                          16,930             (35)
                                                                 ------------     -----------
Net cash provided by operating activities                             457,304         173,253
Cash flows from investing activities:
     Cash acquired in acquisitions                                     66,519          71,476
     Payments made for acquisitions                                  (173,847)       (419,402)
     Purchases of property and equipment                             (497,616)       (250,302)
     Proceeds from sale of property and equipment                      23,028          64,625
     Other                                                            (27,096)          5,375
                                                                 ------------     -----------
Net cash used for investing activities                               (609,012)       (528,228)
Cash flows from financing activities:
     Issuance of common stock - net                                    59,377         223,679
     Net increase in notes receivable                                     319             928
     Payment of deferred financing fees                               (69,571)              -
     Long-term financing:
        Borrowings                                                  4,514,075       1,989,653
        Repayments                                                 (4,288,488)     (1,728,105)
     Other                                                              4,730               -
                                                                 ------------     -----------
Net cash provided by financing activities                             220,442         486,155
                                                                 ------------     -----------
Net increase in cash and cash equivalents for the period               68,734         131,180
Cash and cash equivalents at beginning of year                        117,311          63,340
                                                                 ------------     -----------
Cash and cash equivalents at end of period                       $    186,045     $   194,520
                                                                 ============     ===========


See Notes to Consolidated Financial Statements.
</TABLE>


                                       5
<PAGE>
     Notes to Consolidated Financial Statements

     1.  Organization

              Fred Meyer, Inc., a Delaware corporation, collectively with its
         subsidiaries ("Fred Meyer" or the "Company") is one of the largest food
         retailers in the United States, operating 830 supermarkets and
         multi-department stores located primarily in the Western portion of the
         United States. The Company operates multiple formats that appeal to
         customers across a wide range of income brackets including stores under
         the following banners: Fred Meyer, Smith's Food & Drug Centers,
         Smitty's, QFC, Ralphs, and Food 4 Less.

     2.  Recent Events

              On October 19, 1998, the Company announced the signing of a
         definitive merger agreement with The Kroger Co. ("Kroger"), the largest
         retail grocery chain in the United States. On that date, Kroger
         operated 1,398 food stores, 802 convenience stores and 34 manufacturing
         facilities that manufacture products for sale in all Kroger divisions,
         as well as to external customers. Under the terms of the merger
         agreement, Fred Meyer stockholders will receive one newly issued share
         of Kroger common stock for each share of Fred Meyer common stock. The
         transaction will be accounted for as a pooling of interests. It is
         expected to close in early 1999 subject to approval of Kroger and Fred
         Meyer stockholders and antitrust and other regulatory authorities and
         customary closing conditions. In anticipation of the intended merger
         with Kroger, the Company has secured approval from its banks to amend
         its 1998 Senior Credit Facility (as defined herein) as well as its
         operating lease facility. These proposed amendments are subject to
         completion of the merger and will be guaranteed by Kroger. The
         Company's outstanding senior notes due 2003 through 2008 are expected
         to remain outstanding after the merger. Additional information
         regarding the merger can be found in the Company's current report on
         Form 8-K dated October 20, 1998.

              On December 6, 1998, Ralphs Grocery Company, a subsidiary of the
         Company, sold 38 grocery stores located in Kansas and Missouri to
         Associated Wholesale Grocers, Inc., a member-owned grocery cooperative.

     3.  Acquisitions

              On March 9, 1998, Fred Meyer issued 41.2 million shares of Fred
         Meyer common stock for all the outstanding stock of Quality Food
         Centers, Inc. ("QFC"), a supermarket chain operating 89 stores in the
         Seattle/Puget Sound region of Washington state and 56 Hughes Family
         Markets stores in Southern California as of the date of the merger. As
         a result, QFC became a wholly owned subsidiary of Fred Meyer. The
         merger of Fred Meyer and QFC was accounted for as a pooling of
         interests and the accompanying financial statements reflect the
         consolidated results of Fred Meyer and QFC for all periods presented.
         The amounts included in the prior year results of operations from Fred
         Meyer and QFC are as follows (in thousands, except per share data):


<TABLE>
<CAPTION>
                                                         Fred Meyer         QFC            Total
                                                         Historical      Historical       Company
                                                        ------------    ------------    -----------
<S>                                                     <C>             <C>             <C>        
12 Weeks Ended November 8, 1997
  Net sales                                             $ 1,460,372     $   485,171     $ 1,945,543
  Net income (loss)                                         (72,933)         10,388         (62,545)
  Diluted earnings (loss) per common share                    (0.89)           0.25           (0.51)
40 Weeks Ended November 8, 1997
  Net sales                                               3,611,323       1,385,259       4,996,582
  Net income (loss)                                         (40,554)         29,974         (10,580)
  Diluted earnings (loss) per common share                    (0.64)           0.79           (0.10)
</TABLE>


                                       6
<PAGE>
              On March 10, 1998, the Company acquired Food 4 Less Holdings, Inc.
         ("Ralphs/Food 4 Less"), a supermarket chain operating 409 stores
         primarily in Southern California on that date, which became a
         wholly-owned subsidiary of the Company. The Company issued 21.7 million
         shares of common stock of the Company for all of the equity interests
         of Ralphs/Food 4 Less. The acquisition is being accounted for under the
         purchase method of accounting. The financial statements reflect the
         preliminary allocation of the purchase price and assumption of certain
         liabilities and include the operating results of Ralphs/Food 4 Less
         from the date of acquisition.

              In conjunction with the acquisitions of Ralphs/Food 4 Less and
         QFC, the Company entered into a settlement agreement with the State of
         California in which it agreed to divest 19 specific stores in Southern
         California to settle potential antitrust and unfair competition claims.
         Currently, the Company has sold five of the stores and has sale
         agreements or letters of intent on another 13 stores.

              On September 9, 1997, the Company succeeded to the businesses of
         Fred Meyer Stores, Inc. ("Fred Meyer Stores" and known as Fred Meyer,
         Inc. prior to September 9, 1997) and Smith's Food & Drug Centers, Inc.
         ("Smith's"). At the closing on September 9, 1997, Fred Meyer Stores and
         Smith's, a regional supermarket and drug store chain operating 152
         stores in the Intermountain and Southwestern regions of the United
         States on that date, became wholly owned subsidiaries of the Company.
         The Company issued 1.05 shares of common stock of the Company for each
         outstanding share of Class A Common Stock and Class B Common Stock of
         Smith's and one share of common stock of the Company for each
         outstanding share of common stock of Fred Meyer Stores.

              The Smith's acquisition was accounted for under the purchase
         method of accounting. The financial statements reflect the allocation
         of the purchase price and assumption of certain liabilities and include
         the operating results of Smith's from the date of acquisition. In
         total, the Company issued 33.3 million shares of common stock to the
         Smith's stockholders.

              On August 17, 1997, the Company acquired substantially all of the
         assets and liabilities of Fox Jewelry Company ("Fox") in exchange for
         common stock with a fair value of $9.2 million. The Fox acquisition was
         accounted for under the purchase method of accounting. The results of
         operations of Fox do not have a material effect on the consolidated
         operating results, and therefore are not included in the pro forma data
         presented.

              On March 19, 1997, QFC acquired the principal operations of Hughes
         Markets, Inc. ("Hughes"), including the assets and liabilities related
         to 57 stores located in Southern California and a 50% interest in
         Santee Dairies, Inc., one of the largest dairy plants in California.
         The merger was effected through the acquisition of 100% of the
         outstanding voting securities of Hughes for approximately $360.5
         million in cash and the assumption of approximately $33.2 million of
         indebtedness of Hughes. The Hughes acquisition was accounted for under
         the purchase method of accounting. The financial statements reflect the
         allocation of the purchase price and assumption of certain liabilities
         and include the operating results of Hughes from the date of
         acquisition.

              On February 14, 1997, QFC acquired the principal operations of
         Keith Uddenberg, Inc. ("KUI"), including assets and liabilities related
         to 25 stores in the western and southern Puget Sound region of
         Washington. The merger was effected through the acquisition of 100% of
         the outstanding voting securities of KUI for $34.5 million cash, 1.7
         million shares of common stock and the assumption of approximately
         $23.8 million of indebtedness of KUI. The KUI acquisition was accounted
         for under the purchase method of accounting. The financial statements
         reflect the allocation of the purchase price and assumption of certain
         liabilities and include the operating results of KUI from the date of
         acquisition.

              Additionally, the Company completed the acquisition of food and
         fine jewelry stores during the 40 weeks ended November 7, 1998. On
         October 4, 1998, the Company acquired 123 Littman Jewelers and 9
         Barclays Jewelers stores located primarily in 10 states on the East
         coast. On October 1, 1998, the Company acquired 13 Albertson's and
         Buttrey grocery stores in Montana and

                                       7
<PAGE>
         Wyoming. These acquisitions were accounted for under the purchase
         method of accounting. The results of operations for these acquired
         stores do not have a material effect on the consolidated operating
         results, and therefore are not included in the pro forma data
         presented.

              The following unaudited pro forma information presents the results
         of the Company's operations assuming the Ralphs/Food 4 Less, Smith's,
         QFC, KUI, and Hughes acquisitions occurred at the beginning of each
         period presented. In addition, the following unaudited pro forma
         information gives effect to refinancing certain debt as if such
         refinancing occurred at the beginning of each period presented (in
         thousands, except per share data):

<TABLE>
<CAPTION>
                                                          40 Weeks Ended
                                                   ----------------------------
                                                   November 7,     November 8,
                                                         1998            1997
                                                   -----------     -----------
<S>                                                <C>             <C>        
Net sales                                          $11,568,003     $11,285,962
Income (loss) before extraordinary charge              (91,239)         55,684
Net loss                                              (309,173)       (161,926)
Diluted earnings per common share:
  Income (loss) before extraordinary charge              (0.59)           0.37
  Net loss                                               (2.02)          (1.06)
</TABLE>


              The pro forma financial information does not reflect anticipated
         annualized operating savings and assumes all notes subject to the
         refinancings were redeemed pursuant to tender offers made.
         Additionally, each year includes an extraordinary charge of $217.9
         million, net of the related tax benefit, on the extinguishment of debt
         as a result of refinancing certain debt. The pro forma financial
         information is not necessarily indicative of the operating results that
         would have occurred had the acquisitions been consummated as of the
         beginning of each period nor is it necessarily indicative of future
         operating results.

              The supplemental schedule of business acquisitions is as follows
         (in thousands):

<TABLE>
<CAPTION>
                                                          40 Weeks Ended
                                                   ----------------------------
                                                   November 7,     November 8,
                                                         1998            1997
                                                   -----------     -----------
<S>                                                <C>             <C>        
Fair value of assets acquired                      $ 2,165,950     $ 2,055,091
Goodwill recorded                                    2,397,030       1,221,141
Value of stock issued                                 (652,514)       (767,145)
Liabilities assumed                                 (3,736,619)     (2,089,685)
                                                   -----------     -----------
Cash paid                                          $   173,847     $   419,402
                                                   ===========     ===========
</TABLE>


                                       8
<PAGE>
     4.  Merger Related Costs

              The Company is in the process of implementing its plan to
         integrate its five primary operations (Fred Meyer Stores, Ralphs/Food 4
         Less, Smith's, QFC and Hughes) resulting in merger related costs of
         $31.4 million and $237.5 million for the 12 and 40 weeks ended November
         7, 1998. The integration plan includes the consolidation of
         distribution, information systems, and administrative functions,
         conversion of 78 store banners, closure of seven stores, and
         transaction costs incurred to complete the mergers. The costs were
         reported in the periods in which cash was expended except for $25.9
         million that was accrued for liabilities incurred to exit certain
         activities and retain certain key employees and an $80.4 million charge
         to write-down certain assets. The following table presents components
         of the merger related costs by quarter for the 40 weeks ended November
         7, 1998 (in thousands):

<TABLE>
<CAPTION>
                                               16 Weeks     12 Weeks     12 Weeks     40 Weeks
                                                Ended        Ended        Ended        Ended
                                               May 23,      Aug 15,       Nov 7,       Nov 7,
                                                1998         1998         1998         1998
                                               --------     --------     --------     --------
<S>                                            <C>          <C>          <C>          <C>     
 Charges recorded as cash expended
      Distribution consolidation               $ 10,717     $  1,900     $    321     $ 12,938
      Systems integration                        12,643        6,201       13,017       31,861
      Store conversions                          24,511       11,517        5,924       41,952
      Transaction costs                          29,215        2,839        1,138       33,192
      Store closures                                133                                    133
      Administration integration                  5,370        2,460        3,327       11,157
                                               --------     --------     --------     --------
                                                 82,589       24,917       23,727      131,233
 Noncash asset write-down
      Distribution consolidation                 28,588                                 28,588
      Systems integration                        18,722        2,000        2,333       23,055
      Store conversions                                                          
      Transaction costs                                                          
      Store closures                              6,959       18,532                    25,491
      Administration integration                  3,226                                  3,226
                                               --------     --------     --------     --------
                                                 57,495       20,532        2,333       80,360
 Accrued charges
      Distribution consolidation                                                 
      Systems integration                         1,445                                  1,445
      Store conversions                                                          
      Transaction costs                           1,581        2,108        2,108        5,797
      Store closures                              6,686                                  6,686
      Administration integration                  8,705                     3,316       12,021
                                               --------     --------     --------     --------
                                                 18,417        2,108        5,424       25,949
                                               --------     --------     --------     --------
 Total merger related costs                    $158,501     $ 47,557     $ 31,484     $237,542
                                               ========     ========     ========     ========
 Total charges
      Distribution consolidation               $ 39,305     $  1,900     $    321     $ 41,526
      Systems integration                        32,810        8,201       15,350       56,361
      Store conversions                          24,511       11,517        5,924       41,952
      Transaction costs                          30,796        4,947        3,246       38,989
      Store closures                             13,778       18,532                    32,310
      Administration integration                 17,301        2,460        6,643       26,404
                                               --------     --------     --------     --------
 Total merger related costs                    $158,501     $ 47,557     $ 31,484     $237,542
                                               ========     ========     ========     ========
</TABLE>


                                       9
<PAGE>
              Distribution Consolidation--Represents costs to consolidate
         manufacturing and distribution operations and eliminate duplicate
         facilities. The costs include a $28.6 million write-down to estimated
         net realizable value for the Hughes distribution center in Southern
         California. Net realizable value was determined by a market analysis.
         The facilities are held for sale and depreciation expense for the
         closed Hughes distribution facility has been suspended. Depreciation
         expense in the second and third quarter would have totaled $1.1 million
         if it had not been suspended. Efforts to dispose of the facilities are
         ongoing and a sale is expected in 1999. Also included are $12.9 million
         incurred for incremental labor during the closing of the distribution
         center and other incremental costs incurred as a part of the
         realignment of the Company's distribution system.

              Systems Integration--Represents the costs of integrating systems
         from QFC, Hughes and Smith's computer platforms into Fred Meyer and
         Ralphs' platforms and the related conversion of all corporate office
         and store systems. The asset write-down of $23.1 million includes $17
         million for computer equipment and related software that have been
         abandoned and $6 million associated with computer equipment at QFC
         which is being written off over one year at which time it will be
         abandoned. Costs totaling $31.8 million were expensed as incurred and
         includes $16.7 million of incremental operating costs, principally
         labor, during the conversion process, $9.5 million paid to third
         parties, and $5.0 million of training costs. Also included are
         severance costs for system employees who will be terminated as the
         integration is completed.

              Store Conversions--Includes the costs to convert 55 Hughes stores
         to the Ralphs' banner, 15 Smitty's stores to the Fred Meyer banner,
         five QFC stores to the Fred Meyer banner, and three Fred Meyer stores
         to the Smith's banner. As of November 7, 1998, the conversion of the
         Hughes and QFC stores was substantially complete. Costs totaling $42.0
         million represented incremental cash expenditures for advertising and
         promotions to establish the banner, changing store signage, labor
         required to remerchandise the store inventory and other services which
         were expensed as incurred.

              Transaction Costs--Represents $33.2 million for fees paid to
         outside parties and employee bonuses that were contingent upon the
         completion of the mergers and $5.8 million for an employee stay bonus
         program. The stay bonus program is being accrued ratably over the stay
         period and will be paid in the fourth quarter of 1998.

              Store Closures--Includes the costs to close four stores identified
         as duplicate facilities and to sell three stores pursuant to a
         settlement agreement with the State of California ("AG Stores"). Annual
         sales and operating income for the four duplicate facilities and three
         AG Stores are approximately $133 million and $3 million, respectively.
         The asset write-down represents $6.0 million of book value in excess of
         sale proceeds, $18.5 million for the write-off of the goodwill
         associated with the AG Stores, and $6.7 million of lease termination
         costs. As of November 7, 1998, all stores were closed or sold except
         for three AG Stores which are expected to be sold in the fourth quarter
         of fiscal 1998. The net book value on the AG Stores representing
         building, fixtures and equipment was written down to an estimated net
         realizable value of $5.7 million. Depreciation expense continues to be
         recorded at the historical rate.

              Administration Integration--Includes $14.7 million for labor and
         severance costs of which $9.0 million has been expended and the
         employees have been terminated and $9.4 million to conform accounting
         policies of QFC and Hughes to Fred Meyer, including the calculation of
         bad debt and costs for real estate transactions.


                                       10
<PAGE>
              The following table presents the activity in the reserve accounts
         for the 40 weeks ended November 7, 1998. The beginning balance was zero
         (in thousands):

<TABLE>
<CAPTION>
                                                        Cash payments
                                              ----------------------------------
                                              16 Weeks     12 Weeks     12 Weeks                 Reserve
                                  Charged      Ended        Ended        Ended                   Balance
                                     to       May 23,      Aug 15,       Nov 7,                  at Nov 7,
                                  Expense      1998         1998         1998        Reclass     1998
                                  -------     --------     --------     --------     -------     ---------
<S>                               <C>         <C>          <C>          <C>          <C>         <C>    
Systems integration
      Severance                   $ 1,445                                                        $ 1,445
Transaction costs
      Stay bonus program            5,797                                                          5,797
Store closures
     Lease obligation               6,686     $     23     $    746     $    511                   5,406
Administration integration
      Severance                    12,021        2,681        1,090        3,812                   4,438
                                  -------     --------     --------     --------     -------     -------
Total amounts included in
  Current Liabilities             $25,949     $  2,704     $  1,836     $  4,323     $     -     $17,086
                                  =======     ========     ========     ========     =======     =======
</TABLE>


              Severance--Severance relates to 183 Hughes administrative
         employees in Southern California and 75 QFC administrative employees in
         Seattle. As of November 7, 1998, all of the Hughes employees have been
         terminated. The QFC employees have been notified of their terminations
         on various dates ranging from February 15, 1999 to December 31, 1999.
         Under severance agreements, the amount of severance will be paid over a
         period following the date of termination.

              Lease Obligation--Following the merger, the Company closed a QFC
         store in the first quarter and agreed to dispose of the AG Stores under
         a settlement agreement with the State of California. The lease
         obligation represents future contractual lease payments on these stores
         over the expected holding period, net of any sublease income. The
         Company is actively marketing the stores to potential buyers and
         sub-lease tenants. The disposition of the AG Stores is expected to
         occur in the fourth quarter of fiscal 1998.

              Stay Bonus Program--Represents amounts to be paid under a stay
         bonus program in the fourth quarter of fiscal 1998.

     5.  Summary of Significant Accounting Policies

              Amended Form 10-Q--The Company amended its third quarter 10-Q to
         revise the accounting for its plan to dispose of Santee Dairy. The
         amended 10-Q reflects a change in the accounting treatment to recognize
         the loss on disposition when a definitive agreement for the sale of the
         dairy has been reached. The original filing reflected management's
         estimate of the loss that is anticipated upon disposition of the dairy.
         The impact of the amendment on the third quarter 10-Q was a $44.3
         million reduction of merger related costs and a corresponding decrease
         in net loss of $27.0 million for the 40 weeks ended November 7, 1998.

              Basis of Presentation--The accompanying unaudited consolidated
         financial statements of the Company have been prepared in accordance
         with generally accepted accounting principles for interim financial
         information and in accordance with the instructions to Form 10-Q and
         Article 10 of Regulation S-X. Accordingly, the statements do not
         include all of the information and notes required by generally accepted
         accounting principles for complete financial statements. In the opinion
         of management, all adjustments of a normal recurring nature which are
         considered necessary for a fair presentation have been included. The
         consolidated results of operations presented herein are not necessarily
         indicative of the results to be expected for the year due to the
         seasonality of the Company's business. These consolidated financial
         statements should be read in


                                       11
<PAGE>
         conjunction with the financial statements and related notes
         incorporated by reference in the Company's latest annual report filed
         on Form 10-K.

              Fiscal Year--The Company's fiscal year ends on the Saturday
         closest to January 31. Fiscal year 1997 ended on January 31, 1998
         ("1997") and fiscal year 1998 ends on January 30, 1999 ("1998"). As a
         result of its acquisition, QFC changed its year end to that of Fred
         Meyer beginning February 1, 1998, the first day of fiscal 1998.
         Revenues and expenses of QFC from the end of QFC's fiscal year 1997,
         ended on December 27, 1997, to February 1, 1998 (5 weeks) were
         immaterial and have been excluded from the statement of operations.
         Accordingly, net income of $3.3 million for that period has been added
         to retained earnings.

              Inventories--Inventories consist principally of merchandise held
         for sale and substantially all inventories are stated at the lower of
         last-in, first-out (LIFO) cost or market. Inventories on a first-in,
         first-out method, which approximates replacement cost, would have been
         higher by $66.9 million at November 7, 1998 and $51.8 million at
         January 31, 1998. The pretax LIFO charge in the third quarter was $4.1
         million in 1998 and $2.1 million in 1997. The pretax LIFO charge for
         the first 40 weeks was $15.1 million in 1998 and $5.6 million in 1997.

              Goodwill--Goodwill is being amortized on a straight-line basis
         over 15 to 40 years. Goodwill recorded in connection with the
         acquisition of Ralphs/Food 4 Less, Smith's, Hughes, and KUI (see Note
         3) is being amortized over 40 years. Goodwill recorded in connection
         with the Fox acquisition is being amortized over 15 years. Management
         periodically evaluates the recoverability of goodwill based upon
         current and anticipated net income and undiscounted future cash flows.

              Use of Estimates--The preparation of financial statements in
         conformity with generally accepted accounting principles requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements. Actual results
         could differ from those estimates.

              Income Taxes--Deferred income taxes are provided for those items
         included in the determination of income or loss in different periods
         for financial reporting and income tax purposes. Targeted jobs and
         other tax credits are recognized in the year realized.

              Deferred income taxes are recognized for the tax consequences in
         future years of differences between the tax bases of assets and
         liabilities and their financial reporting amounts at each year end
         based on enacted tax laws and statutory tax rates applicable to the
         periods in which the differences are expected to affect taxable income.
         Income tax expense is the tax payable for the period and the change
         during the period in deferred tax assets and liabilities.

              Deferred tax assets recognized by the Company are presented net of
         any deferred tax liabilities and valuation allowance and consist
         primarily of net operating loss carryforwards. The deferred tax assets
         will be used to offset future tax liabilities generated from taxable
         income. However, the amount available to offset the consolidated tax
         liability will be limited by each subsidiary's tax circumstances and
         availability of its net operating loss carryforwards.

              Earnings per Share--Basic earnings per common share are computed
         by dividing net income by the weighted average number of common shares
         outstanding. Diluted earnings per common share are computed by dividing
         net income by the weighted average number of common and common
         equivalent shares outstanding which consist of outstanding stock
         options and warrants. Common equivalent shares are excluded from the
         diluted weighted average share and common equivalent shares outstanding
         for the first 40 weeks of 1998 due to the net loss.

              Reclassifications--Certain prior period amounts have been
         reclassified to conform to current period presentation. The
         reclassifications have no effect on reported net income.


                                       12
<PAGE>
     6.  Comprehensive Income

              Effective February 1, 1998, the Company adopted Statement of
         Financial Accounting Standards No. 130, "Reporting Comprehensive
         Income," which requires items previously reported as a component of
         stockholders' equity to be more prominently reported in a separate
         financial statement as a component of comprehensive income. Components
         of comprehensive income include the following (in thousands):

<TABLE>
<CAPTION>
                                            12 Weeks Ended                 40 Weeks Ended
                                      -------------------------      -------------------------
                                      November 7,    November 8,     November 7,    November 8,
                                            1998           1997            1998           1997
                                      ----------     ----------      ----------     ----------
<S>                                   <C>            <C>             <C>            <C>        
Net income (loss)                     $   28,840     $  (62,545)     $ (248,405)    $  (10,580)
Income tax benefit from the
  exercise of stock options                  595          2,150           5,078          5,978
                                      ----------     ----------      ----------     ----------
Comprehensive income (loss)           $   29,435     $  (60,395)     $ (243,327)    $   (4,602)
                                      ==========     ==========      ==========     ==========
</TABLE>


     7.  Long-term Debt

         Long-term debt consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                 November 7,     January 31,
                                                                       1998            1998
                                                                 ----------     -----------
<S>                                                              <C>            <C>        
1997 Senior Credit Facility                                      $         -    $ 1,300,000
1998 Senior Credit Facility                                        2,448,750              -
Senior notes, unsecured, due 2003 through 2008,
  fixed interest rate from 7.15% to 7.45%                          1,750,000              -
QFC Credit Facility                                                                 214,293
Commercial paper with maturities through February 10, 1999,
  classified as long-term, interest rates of 5.78% to 6.10%
  at August 15, 1998                                                 628,075        367,156
QFC 8.7% Senior Subordinated Notes, principal due 2007 with
  interest payable semi-annually                                       3,065        150,000
Long-term notes secured by trust deeds, due through 2016,
  interest rates from 5.00% to 10.50%                                 59,941         61,075
Uncommitted bank borrowings classified as long-term                   85,000         79,000
Ralphs senior subordinated notes, due 2002 through 2007,
  fixed interest rates from 9.0% to 13.75%                            35,232              -
Ralphs senior notes, unsecured, due 2004,
  fixed interest rate of 10.45%                                       13,458              -
Other                                                                 70,475         29,448
                                                                 -----------    -----------
Total                                                              5,093,996      2,200,972
Less current portion                                                  94,140         16,178
                                                                 -----------    -----------
Total                                                            $ 4,999,856    $ 2,184,794
                                                                 ===========    ===========
</TABLE>


              In conjunction with the acquisitions of QFC and Ralphs/Food 4 Less
         in March 1998, the Company entered into new financing arrangements that
         refinanced a substantial portion of the Company's principal debt
         facilities and indebtedness assumed in the acquisitions. The new
         financing arrangements included a new bank credit facility and a public
         issue of $1.75 billion senior unsecured notes. The new bank credit
         facility (the "1998 Senior Credit Facility") provided for a $1.875
         billion five-year revolving credit agreement and a $1.625 billion
         five-year term note. All indebtedness under the 1998 Senior Credit
         Facility is guaranteed by certain of the Company's


                                       13
<PAGE>
         subsidiaries and secured by the stock in the subsidiaries. The
         revolving portion of the 1998 Senior Credit Facility is available for
         general corporate purposes, including the support of the commercial
         paper program of the Company. Commitment fees are charged at .30% on
         the unused portion of the five-year revolving credit facility. Interest
         on the 1998 Senior Credit Facility is at Adjusted LIBOR plus a margin
         of 1.0%. At November 7, 1998, the weighted average interest rate on the
         five year term note and the amounts outstanding under the revolving
         credit facility were 6.5% and 6.3%, respectively.

              The unsecured senior notes issued on March 11, 1998, included $250
         million of five-year notes at 7.15%, $750 million of seven-year notes
         at 7.38%, and $750 million of ten-year notes at 7.45% (the "Notes"). In
         connection with the issuance of the Notes, each of the Company's direct
         or indirect wholly-owned subsidiaries has jointly and severally
         guaranteed the Notes on a full and unconditional basis ("Subsidiary
         Guarantors"). The Subsidiary Guarantors are 100% wholly owned
         subsidiaries of the Company and constitute all of the Company's direct
         and indirect subsidiaries, other than inconsequential subsidiaries. The
         non-guaranteeing subsidiaries represent less than 3%, on an individual
         and aggregate basis, of the Company's consolidated assets, pretax
         income, cash flow and net investment in subsidiaries.

              The Company is a holding company with no independent operations or
         assets other than those relating to its investments in its
         subsidiaries. Separate financial statements of the Subsidiary
         Guarantors are not included because the guarantees are full and
         unconditional, the Subsidiary Guarantors are jointly and severally
         liable and the separate financial statements and other disclosures
         concerning the Subsidiary Guarantors are not deemed material to
         investors by management of the Company. No restrictions exist on the
         ability of the Subsidiary Guarantors to make distributions to the
         Company, except, however, the obligations of each Guarantor under its
         Guarantee are limited to the maximum amount as will result in
         obligations of such Guarantor under its Guarantee not constituting a
         fraudulent conveyance or fraudulent transfer for purposes of Bankruptcy
         Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
         Transfer Act or any similar Federal or state law (e.g. adequate capital
         to pay dividends under corporate laws).

              The 1998 Senior Credit Facility requires the Company to comply
         with certain ratios related to indebtedness to earnings before
         interest, taxes, depreciation and amortization ("EBITDA") and fixed
         charge coverage. In addition, the 1998 Senior Credit Facility limits
         dividends on and redemption of capital stock.

              In conjunction with the Smith's acquisition in September 1997, the
         Company entered into a bank credit facility (the "1997 Senior Credit
         Facility") that refinanced a substantial portion of the Company's
         indebtedness and indebtedness assumed in the Smith's acquisition. The
         1997 Senior Credit Facility was refinanced by the 1998 Senior Credit
         Facility.

              The Company has established uncommitted money market lines with
         five banks of $125.0 million. These lines, which generally have terms
         of approximately one year, allow the Company to borrow from the banks
         at mutually agreed upon rates, usually below the rates offered under
         the 1998 Senior Credit Facility. The Company also has $900.0 million of
         unrated commercial paper facilities with four commercial banks. The
         Company has the ability to support commercial paper and other debt on a
         long-term basis through its bank credit facilities and therefore, based
         upon management's intent, has classified these borrowings, which
         totaled $713.1 million at November 7, 1998, as long-term debt.

              The Company on occasion enters into various interest rate swap,
         cap and collar agreements to reduce the impact of changes in interest
         rates on its floating rate long-term debt. At November 7, 1998, the
         Company had outstanding one collar agreement which expires on July 24,
         2003 and effectively sets interest rate limits on a notional principal
         amount of $300.0 million on the Company's floating rate long-term debt.
         The agreement limits the interest rate fluctuation of the 3-month
         adjusted LIBOR (as defined in the collar agreement) to a range between
         4.10% and 6.50%


                                       14
<PAGE>
         and requires quarterly cash settlements for interest rate fluctuations
         outside of the limits. As of November 7, 1998, the 3-month adjusted
         LIBOR was 5.38%. The Company is exposed to credit loss in the event of
         nonperformance by the counterparties to the interest rate collar
         agreement. The Company requires an "A" or better rating of the
         counterparties and, accordingly, does not anticipate nonperformance by
         the counterparties.

              Annual long-term debt maturities for the five fiscal years
         subsequent to November 7, 1998 are $18.1 million in 1998, $134.8
         million in 1999, $240.9 million in 2000, $362.2 million in 2001, and
         472.7 million in 2002.

              The Company recorded in the first 40 weeks of 1998 an
         extraordinary charge of $357.8 million less a $139.9 million income tax
         benefit which consisted of premiums paid in the prepayment of certain
         notes and bank facilities of Fred Meyer, QFC and Ralphs/Food 4 Less and
         the write-off of the related deferred financing costs.

     8.  Commitments and Contingencies

              The Company and its subsidiaries are parties to various legal
         claims, actions and complaints, certain of which involve material
         amounts. Although the Company is unable to predict with certainty
         whether or not it will ultimately be successful in these legal
         proceedings or, if not, what the impact might be, management presently
         believes that disposition of these matters will not have a material
         adverse effect on the Company's consolidated financial statements.

              The Company is a 50% owner of Santee Dairies, L.L.C. ("Santee")
         and has a 10 year product supply agreement with Santee that requires
         the Company to purchase 9 million gallons of fluid milk and other
         products annually. The product supply agreement expires on July 29,
         2007. Upon acquisition of Ralphs, Santee became excess capacity and a
         duplicate facility. The Company is currently engaged in efforts to
         dispose of its interest in Santee which may result in a loss of
         approximately $45 million in 1999.


Item 2. Management's Discussion and Analysis 
of Financial Condition and Results of Operations.
------------------------------------------------

              This discussion and analysis should be read in conjunction with
         the Company's consolidated financial statements.

              The Company amended its third quarter 10-Q to revise the
         accounting for its plan to dispose of Santee Dairy. The amended 10-Q
         reflects a change in the accounting treatment to recognize the loss on
         disposition when a definitive agreement for the sale of the dairy has
         been reached. The original filing reflected management's estimate of
         the loss that is anticipated upon disposition of the dairy. The impact
         of the amendment on the third quarter 10-Q was a $44.3 million
         reduction of merger related costs and a corresponding decrease in net
         loss of $27.0 million for the 40 weeks ended November 7, 1998.


     RECENT EVENT

              On October 19, 1998, the Company announced the signing of a
         definitive merger agreement with The Kroger Co. ("Kroger"), the largest
         retail grocery chain in the United States. On that date, Kroger
         operated 1,398 food stores, 802 convenience stores and 34 manufacturing
         facilities that manufacture products for sale in all Kroger divisions,
         as well as to external customers. Under the terms of the merger
         agreement, Fred Meyer stockholders will receive one newly issued share
         of Kroger common stock for each share of Fred Meyer common stock. The
         transaction will be accounted for as a pooling of interests. It is
         expected to close in early 1999 subject to approval of Kroger and Fred
         Meyer stockholders and antitrust and other regulatory authorities and
         customary closing conditions. In


                                       15
<PAGE>
         anticipation of the intended merger with Kroger, the Company has
         secured approval from its banks to amend its 1998 Senior Credit
         Facility as well as its operating lease facility. These proposed
         amendments are subject to completion of the merger and will be
         guaranteed by Kroger. The Company's outstanding senior notes due 2003
         through 2008 will remain outstanding after the merger. Additional
         information regarding the merger can be found in the Company's current
         report on Form 8-K dated October 20, 1998.


     MERGER RELATED COSTS

              The Company is in the process of implementing its plan to
         integrate its five primary operations (Fred Meyer Stores, Ralphs/Food 4
         Less, Smith's, QFC and Hughes) resulting in merger related costs of
         $31.4 million and $237.5 million for the 12 and 40 weeks ended November
         7, 1998. The integration plan includes the consolidation of
         distribution, information systems, and administrative functions,
         conversion of 78 store banners, closure or sale of seven stores, and
         transaction costs incurred to complete the mergers. The costs were
         reported in the periods in which cash was expended except for $25.9
         million that was accrued for liabilities incurred to exit certain
         activities, sever employees, and retain certain key employees and an
         $80.4 million charge to write-down certain assets. The Company
         estimates that the total cost to implement this plan will be
         approximately $355 million, of which $158.5 million, $47.6 million and
         $31.4 million were incurred in the first, second and third quarters of
         fiscal 1998, respectively. The remaining cost of $115 million includes
         $60 million to complete the systems integration, $10 million to
         complete the conversion of store banners, and $45 million to dispose of
         the Santee Dairy (see Disposal of Santee Dairy). Of the $115 million of
         remaining costs, approximately $20 million is expected to be incurred
         in the fourth quarter, approximately $45 million in the second quarter
         of 1999, and the remaining $50 million is expected to be incurred
         ratably in 1999. The Company estimates that successful completion of
         its integration plan will result in net annual cost savings and
         improvements attributable to operating synergies of $150 million by
         2000. Such cost savings and improvements consist of reduced advertising
         costs from eliminating banners, reduced distribution costs by
         eliminating distribution centers and independent wholesalers, increased
         efficiencies from volume purchasing and merchandising, increased
         efficiencies from maximizing capacity at manufacturing facilities, and
         elimination of general and administrative costs by consolidating
         offices, processing centers, and levels of supervision.

              The distribution consolidation includes the transfer of purchasing
         and distribution functions from the Hughes facility to various Ralphs'
         facilities and transfer of QFC's distribution and manufacturing
         functions from wholesalers to various Fred Meyer facilities. Costs
         incurred to complete the distribution consolidation and close the
         Hughes facility include the write-down of assets held for sale to net
         realizable value, severance and incremental labor and other costs. The
         Company has substantially completed the distribution consolidation
         except for the disposition of the Hughes facility.

              The information systems integration plan is to consolidate into
         two processing platforms: a northern platform in Portland, Oregon and a
         southern platform in Los Angeles, California. The consolidation
         requires the conversion of all Smith's and QFC systems into Fred Meyer
         systems and the conversion of all Hughes systems into Ralphs' systems
         which results in the closure of three duplicate processing facilities.
         Costs incurred to complete the information systems integration include
         the write-down of assets that have been abandoned or become obsolete,
         incremental operating costs during the integration process, payments to
         third parties, training costs and severance. Computer hardware and
         software that was abandoned in the first quarter following the QFC
         merger was written-down to net realizable value. Computer hardware and
         software that will be utilized until the end of the integration process
         is being written-down over its reduced estimated useful life. The
         conversion of Hughes systems into Ralphs' systems is complete and the
         conversion of Smith's and QFC's systems into Fred


                                       16
<PAGE>
         Meyer systems is expected to be completed by the end of 1999. The
         remaining costs are expected to include charges for assets write-downs,
         incremental operating costs, payments to third parties and training
         costs.

              The administrative plan is similar to the information systems
         integration plan except that in addition to Portland and Los Angeles,
         some administrative functions will remain in Salt Lake City resulting
         in the closure of two administrative offices. This integration includes
         the consolidation of accounting, payroll processing, benefits and risk
         administration, property management and legal services into the
         remaining administrative offices. Costs incurred to complete the
         administrative consolidation primarily consists of labor and severance
         costs. One of the two excess administrative offices is closed and the
         remainder of the administrative consolidation is expected to be
         completed by the end of 1999.

              The conversion of store banners includes the conversion of 55
         Hughes stores to the Ralphs' banner, 15 Smitty's stores to the Fred
         Meyer banner, five QFC stores to the Fred Meyer banner and three Fred
         Meyer stores to the Smith's banner. Costs incurred to complete the
         banner conversions include incremental cash expenditures of $28.9
         million for advertising and promotions to establish the banner, and
         $9.5 million for labor required to remerchandise the store inventory.
         The 55 Hughes stores have been converted to the Ralphs banner and the
         five QFC stores have been converted to the Fred Meyer banner. The
         remaining banner conversions are expected to be completed by the end of
         1999. The remaining costs are expected to include charges for
         advertising and promotions costs incurred to establish the banner and
         labor to remerchandise the store.

              The closure or sale of seven stores includes three stores to be
         sold pursuant to a settlement agreement with the State of California
         (the "AG Stores") and four duplicate facilities. Costs incurred on
         these stores include the write-down of assets held for sale to net
         realizable value, the write-off of goodwill associated with the AG
         Stores and a charge for future contractual lease payments over the
         expected holding period, net of sublease income. Buyers have been
         identified for the three AG Stores and the sale of these stores is
         expected to be completed in the fourth quarter. The remaining four
         stores have been closed and three have been sold as of November 7,
         1998. All costs to close the stores have been charged to operations and
         expended prior to November 7, 1998 except for lease obligations.

              Transaction costs represent fees paid to outside parties, employee
         bonuses contingent upon the closing of the merger and an accrual for an
         employee stay bonus program.


     DISPOSAL OF SANTEE DAIRY

              The Company is a 50% owner of Santee Dairies, L.L.C. ("Santee")
         and has a 10 year product supply agreement with Santee that requires
         the Company to purchase 9 million gallons of fluid milk and other
         products annually. The product supply agreement expires on July 29,
         2007. Upon acquisition of Ralphs, Santee became excess capacity and a
         duplicate facility. The Company is currently engaged in efforts to
         dispose of its interest in Santee which may result in a loss of
         approximately $45 million in 1999.


     RESULTS OF OPERATIONS

              The following discussion summarizes the Company's operating
         results for 1998 compared with 1997. However, 1998 results are not
         comparable to prior year results due to the three recent acquisitions
         (See Note 3 of Notes to Consolidated Financial Statements). The 1998
         results include the results from Fred Meyer Stores, Smith's and QFC for
         the full period and include Ralphs/Food 4 Less from March 10, 1998. The
         1997 results include Fred Meyer Stores and QFC for the full period and
         Smith's from September 9, 1997.


                                       17
<PAGE>
     Comparison of the 12 and 40 weeks ended November 7, 1998 with the 12 and
     40 weeks ended November 8, 1997

              Net sales for the 12 weeks ended November 7, 1998 increased $1.5
         billion to $3.5 billion from $2.0 billion for the 12 weeks ended
         November 8, 1997 and increased $6.0 billion to $11.0 billion in the 40
         weeks ended November 7, 1998 from $5.0 billion in the 40 weeks ended
         November 8, 1997. The increases in sales were caused primarily by the
         recent acquisitions of Ralphs/Food 4 Less and Smith's. Sales at Smith's
         accounted for $203.9 million and $1.9 billion of the increases and
         Ralphs/Food 4 Less accounted for $1.5 billion and $4.3 billion of the
         increases for the 12 and 40 weeks ended November 7, 1998, respectively.

              Comparable store sales including the Ralphs/Food 4 Less and
         Smith's stores as if acquired at the beginning of the comparable
         periods and excluding the Hughes and Smitty's stores which are
         currently being converted to other formats increased 3.4% and 2.4% from
         the prior year for the 12 and 40 weeks ended November 7, 1998,
         respectively.

              Gross margin increased as a percentage of net sales from 29.6% for
         the 12 weeks ended November 8, 1997 to 30.0% for the 12 weeks ended
         November 7, 1998 and from 29.6% for the 40 weeks ended November 8, 1997
         to 29.7% for the 40 weeks ended November 7, 1998. Increases in gross
         margin as a percent of sales were generated primarily from economies of
         scale resulting from the Company's increased sales offset almost
         entirely by losses on liquidated inventory of $2.3 million and $8.9
         million for the 12 and 40 weeks ended November 7, 1998, respectively,
         incurred in connection with store banner conversions and distribution
         consolidations and by changes in the Company's sales mix between food
         and nonfood. The amount of food sales, which have a lower gross margin
         percent, compared to total sales increased over the prior year due to
         the recent acquisitions.

              Operating and administrative expenses were $833.8 million and
         $488.7 million for the 12 weeks ended November 7, 1998 and November 8,
         1997, respectively and were $2.7 billion and $1.3 billion for the 40
         weeks ended November 7, 1998 and November 8, 1997, respectively.
         Operating and administrative expenses decreased as a percentage of
         sales 1.1% and 1.25% from the prior year for the 12 and 40 weeks ended
         November 7, 1998, respectively. The reduction of operating and
         administrative expenses as a percent of sales is due to economies of
         scale resulting from the Company's increased sales and lower operating
         and administrative expenses as a percent of sales at Smith's and
         Ralph's/Food 4 Less, which were recently acquired and are lower cost
         operations. Additionally, the Company benefited from the suspension of
         contributions to certain multi-employer pension and benefit plans
         totaling $15.2 million and $32.3 million in the 12 and 40 weeks ended
         November 7, 1998, respectively.

              Amortization of goodwill increased $16.4 million and $57.9 million
         from the prior year for the 12 and 40 weeks ended November 7, 1998,
         respectively, as a result of the recent acquisitions.

              The merger related costs of $31.4 million and $237.5 million for
         the 12 and 40 weeks ended November 7, 1998, respectively, were incurred
         in connection with the Company's plan to integrate its five primary
         operations. See Merger Related Costs.

              Interest expense increased to $92.9 million from $30.2 million for
         the 12 weeks ended November 7, 1998 and November 8, 1997, respectively
         and increased to $284.7 million from $66.2 million for the 40 weeks
         ended November 7, 1998 and November 8, 1997, respectively. The increase
         in interest expense for the 12 and 40 week periods primarily reflect
         the increased amount of indebtedness assumed and/or incurred in
         conjunction with the acquisitions of Smith's and Ralphs/Food 4 Less.

              The effective tax rates are affected by increased goodwill
         amortization and certain merger costs which are not deductible for tax
         purposes. The effective tax rates for the income tax expense were 52.1%
         and 42.4% for the 12 weeks ended November 7, 1998 and November 8, 1997,
         respectively. For


                                       18
<PAGE>
         the 40 weeks ended November 7, 1998, the amount of nondeductible
         goodwill amortization and merger costs was greater than the income
         before income tax which resulted in an unusually high effective tax
         rate of 285.1%.

              Income (loss) before extraordinary charge was $29.2 million and
         $(30.5) million for the 12 and 40 weeks ended November 7, 1998,
         respectively, compared to $28.7 million and $80.6 million for the 12
         and 40 weeks ended November 8, 1997, respectively. The changes are a
         result of the above mentioned factors.

              The extraordinary charges of $.3 million and $217.9 million for
         the 12 and 40 weeks ended November 7, 1998, respectively, consist of
         fees incurred in conjunction with the prepayment of certain
         indebtedness and the write-off of related debt issuance costs.

              Net income increased to $28.8 million for the 12 weeks ended
         November 7, 1998 from a net loss of $62.5 million for the 12 weeks
         ended November 8, 1997 and decreased to a loss of $248.4 million for
         the 40 weeks ended November 7, 1998 from a loss of $10.6 million for
         the 40 weeks ended November 8, 1997 primarily due to the factors
         discussed above.


     LIQUIDITY AND CAPITAL RESOURCES

              The Company funded its working capital and capital expenditure
         needs in 1998 through internally generated cash flow and the issuance
         of unrated commercial paper, supplemented by borrowings under committed
         and uncommitted bank lines of credit and lease facilities.

              Cash provided by operating activities was $457.3 million for the
         40 weeks ended November 7, 1998 compared to $173.3 million for the 40
         weeks ended November 8, 1997. The increase in cash provided from
         operating activities is due primarily to an improvement in operating
         income resulting from the recent acquisitions. The Company's principal
         use of cash during the period is for seasonal purchases of inventory.
         Because of the inventory turnover rate, the Company is able to finance
         a substantial portion of the increased inventory through trade
         payables.

              Cash used for investing activities was $609.0 million for the 40
         weeks ended November 7, 1998 compared to $528.2 million for the 40
         weeks ended November 8, 1997. The investing activities consisted
         primarily of capital expenditures and business acquisitions. Capital
         expenditures of $497.6 million in the current period were for the
         construction of new stores, remodeling existing stores and additions to
         distribution centers and offices. During the 40 weeks ended November 7,
         1998, the Company opened 17 new stores and completed the remodel of 72
         stores. The Company intends to use the combination of cash flows from
         operations and borrowings under its credit facilities to finance its
         capital expenditure requirements for 1998, currently budgeted to be
         approximately $750.0 million, net of estimated real estate sales and
         stores financed on leases. If the Company determines that it is
         preferable, it may fund its capital expenditure requirements by
         mortgaging facilities, entering into sale/leaseback transactions, or by
         issuing additional debt or equity. The Company currently owns real
         estate with a net book value of approximately $1.6 billion.

              Additionally, the Company completed several business acquisitions
         which resulted in the use of cash for investing activities. See Note 3
         of Notes to Consolidated Financial Statements for a discussion of the
         Company's acquisitions.

              Cash provided by financing activities was $220.4 million for the
         40 weeks ended November 7, 1998. The financing activities consisted
         primarily of cash receipts on the exercise of stock options, principal
         payments on long-term debt and capital leases, and activity related to
         the debt refinancing completed in conjunction with the acquisitions of
         Ralphs/Food 4 Less and QFC.


                                       19
<PAGE>
              On March 11, 1998 the Company entered into new financing
         arrangements which included a public issue of $1.75 billion of senior
         unsecured notes (the "Notes") and a bank credit facility (the "1998
         Senior Credit Facility"). The 1998 Senior Credit Facility included a
         $1.875 billion five-year revolving credit agreement and a $1.625
         billion five-year term loan. The Notes consisted of $250 million of
         five-year notes at 7.15%, $750 million of seven-year notes at 7.38% and
         $750 million of ten-year notes at 7.45%. Each of the Company's direct
         or indirect wholly-owned subsidiaries has jointly and severally
         guaranteed the Notes on a full and unconditional basis. No restrictions
         exist on the ability of the Subsidiary Guarantors to make distributions
         to the Company, except, however, the obligations of each Subsidiary
         Guarantor under its Guarantee are limited to the maximum amount as will
         result in obligations of such Guarantor under its Guarantee not
         constituting a fraudulent conveyance or fraudulent transfer for
         purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
         Uniform Fraudulent Transfer Act or any similar Federal or state law
         (e.g. adequate capital to pay dividends under corporate laws). The
         obligations of the Company under the 1998 Senior Credit Facility are
         guaranteed by certain subsidiaries and are also collateralized by the
         stock of certain subsidiaries.

              In addition to the 1998 Senior Credit Facility and Notes, the
         Company entered into a $500 million five-year operating lease facility,
         which refinanced $303 million in existing lease financing facilities.
         At November 7, 1998, $332.0 million was outstanding on this lease
         facility. The remaining balance of this lease facility will be used for
         land acquisition and construction costs for new stores. The obligations
         of the Company under the lease facility are guaranteed by certain
         subsidiaries and are also collateralized by the stock of certain
         subsidiaries.

              At November 7, 1998, the Company had $125.0 million of uncommitted
         money market lines with five banks and $900.0 million in unrated
         commercial paper facilities with four banks. The uncommitted money
         market lines and unrated commercial paper are used primarily for
         seasonal inventory requirements, new store construction and financing
         existing store remodeling, acquisition of land, and major projects such
         as management information systems. At November 7, 1998, a total of
         approximately $265.6 million was available for borrowings under the
         1998 Senior Credit Facility and the commercial paper facilities and
         $40.0 million was available for borrowings from the uncommitted money
         market lines.

              See Note 7 of Notes to Consolidated Financial Statements for a
         discussion of the Company's interest rate swap, cap and collar
         agreements.

              The Company had $44.3 million of outstanding Letters of Credit as
         of November 7, 1998. The Letters of Credit are used to support the
         importation of goods and to support the performance, payment, deposit
         or surety obligations of the Company.


     Effect of LIFO

              During each year, the Company estimates the LIFO adjustment for
         the year based on estimates of three factors: inflation rates
         (calculated by reference to the Department Stores Inventory Price Index
         published by the Bureau of Labor Statistics for soft goods and jewelry
         and to internally generated indices based on Company purchases during
         the year for all other departments), expected inventory levels, and
         expected markup levels (after reflecting permanent markdowns and cash
         discounts). At year-end, the Company makes the final adjustment
         reflecting the difference between the Company's prior quarterly
         estimates and actual LIFO amount for the year.


     Effect of Inflation

              While management believes that some portion of the increase in
         sales is due to inflation, it is difficult to segregate and to measure
         the effects of inflation because of changes in the types of


                                       20
<PAGE>
         merchandise sold year-to-year and other pricing and competitive
         influences. By attempting to control costs and efficiently utilize
         resources, the Company strives to minimize the effects of inflation on
         its operations.


     Recent Accounting Changes

              SFAS No. 131 - Disclosures about Segments of an Enterprise and
         Related Information is effective for the Company's fiscal 1998.
         However, under this standard no interim disclosures are required. Any
         required disclosure will be included in the Company's Form 10-K for
         fiscal 1998. The Company believes that the disclosure will not have a
         material impact to financial reporting.

              SFAS No. 133 - Accounting for Derivative Instruments and Hedging
         Activities is effective for the Company's fiscal 2000. The Company
         currently has outstanding one collar agreement that would be reported
         under this standard and has determined that the impact of this
         agreement on financial reporting is immaterial.


     Year 2000

              The Company and each of its subsidiaries are dependent on computer
         hardware, software, systems, and processes ("Information Technology")
         and non-information technology systems such as telephones, clocks,
         scales, and refrigeration units or other equipment containing embedded
         microprocessor technology ("Non-IT Systems") in several critical
         operating areas, including store and distribution operations, product
         merchandise and procurement, manufacturing plant operations, inventory
         and labor management, and accounting.

              The Company is currently working to resolve the potential effect
         of the year 2000 on the processing of date-sensitive information within
         these various systems. The year 2000 problem is the result of computer
         programs being written using two digits (rather than four) to define
         the applicable year. Company programs that have date-sensitive software
         may recognize a date using ?00" as the year 1900 rather than 2000,
         which could result in a miscalculation or system failure. The date
         issue also applies to equipment with embedded microprocessor chips.

              The Company has developed a plan (the "Plan") to access and update
         its Information Technology systems and Non-IT Systems for year 2000
         readiness and to provide for continued functionality. The Plan focuses
         on critical business areas, which are separated into three major
         categories: (1) Information Technology, which includes all hardware and
         software on all processing platforms; (2) merchandise and external
         entities, including product suppliers, service providers, and those
         with whom the Company exchanges information; and (3) Non-IT Systems.
         Additionally, the Plan consists of three phases: (1) creating an
         inventory of systems and assessing the scope of the year 2000 problem
         as it relates to those systems; (2) remediating any year 2000 problems;
         and (3) testing and implementing systems following remediation.

              The following table estimates the Company's completion status for
         each phase of the Plan as of November 7, 1998, based on information
         currently available:

<TABLE>
<CAPTION>
                                                            Percent Complete
                                                     -------------------------------
                                        Category     Phase 1     Phase 2     Phase 3
                                        --------     -------     -------     -------
<S>                                         <C>         <C>         <C>         <C>
Information Technology                      1           83%         55%         28%
Merchandise and external entities           2           63%         28%         3%
Non-IT Systems                              3           63%         15%         5%
</TABLE>


                                       21
<PAGE>
              Phase 1 is expected to be completed by the end of the first
         quarter of 1999 for all three categories. Phase 2 and 3 will continue
         throughout calendar 1999. Systems are regularly monitored and
         procedures are in place to detect potential re-introduction of date
         problems.

              The Company's management is currently formulating contingency
         plans in the event that any critical elements of the Plan should fail,
         or any of the Company's vendors or service providers fail to be year
         2000 ready. The contingency plans may be implemented to minimize the
         risk of interruption of the Company's business. We expect that
         contingency plans will be completed by the end of the third quarter of
         1999.

              The Company's principal vendors, service providers, and other
         third parties on which the Company relies for business operations have
         been contacted for a status on year 2000 readiness. Based on the
         Company's assessment of their responses, the Company believes that many
         of its principal vendors, service providers and other third parties are
         taking action for year 2000 readiness. However, the Company has limited
         ability to test and control such third parties' year 2000 readiness and
         no assurance can be given that failure of such third parties to address
         the year 2000 issue will not cause an interruption of the Company's
         business.

              The Company expects the Plan for critical systems to be
         substantially completed during the fourth calendar quarter of 1999.
         However, the Company's ability to timely execute its Plan may be
         adversely affected by a variety of factors, some of which are beyond
         the Company's control, including the potential for unforeseen
         implementation problems, delays in the delivery of products, and
         disruption of store operations resulting from a loss of power or
         communication links between stores, distribution centers, and
         headquarters. Based on currently available information, the Company is
         unable to determine if such interruptions are likely to have a material
         adverse effect on the Company's results of operations, liquidity, or
         financial condition.

              The Company has committed significant resources in connection with
         resolving its year 2000 issue. The total estimated costs of the Plan,
         exclusive of capital expenditures, are expected to be $25.0 to $30.0
         million, of which approximately $3.0 million was expensed in 1997.
         Costs charged to operations for the 40 weeks ended November 7, 1998
         totaled $4.0 million, which represents an immaterial portion of the
         Company's information services budget over the period. Estimated costs
         expected to be incurred and expensed are approximately $2.0 million in
         the fourth quarter of 1998 and $13.0 to $21.0 million thereafter.


     Forward-looking Statements; Factors Affecting Future Results

              Certain information set forth in this report contains
         "forward-looking statements" within the meaning of federal securities
         laws. The Company may make other forward-looking statements from time
         to time. These forward-looking statements may include information
         regarding the Company's plans for future operations, expectations
         relating to cost savings and the Company's integration strategy with
         respect to its recent mergers, store expansion and remodeling, capital
         expenditures, inventory reductions and expense reduction. The following
         factors, as well as those discussed below, are among the principal
         factors that could cause actual results to differ materially from the
         forward-looking statements: business and economic conditions generally
         and in the regions in which the Company's stores are located, including
         the rate of inflation; population, employment and job growth in the
         Company's markets; demands placed on management by the substantial
         increase in the Company's size; loss or retirement of senior management
         of the Company or of its principal operating subsidiaries; changes in
         the availability of debt or equity capital and increases in borrowing
         costs or interest rates, especially since a substantial portion of the
         Company's borrowings bear interest at floating rates; competitive
         factors, such as increased penetration in the Company's markets by
         large national food and nonfood chains, large category-dominant stores
         and large national and regional


                                       22
<PAGE>
         discount retailers (whether existing competitors or new entrants) and
         competitive pressures generally, which could include price-cutting
         strategies, store openings and remodels; results of the Company's
         programs to decrease costs as a percent of sales; increases in labor
         costs and deterioration in relations with the union bargaining units
         representing the Company's employees; unusual unanticipated costs or
         unanticipated consequences relating to the recent mergers and
         integration strategy and any delays in the realization thereof;
         operational inefficiencies in distribution or other Company systems,
         including any that may result from the recent mergers; issues arising
         from addressing the year 2000 problem; legislative or regulatory
         changes adversely affecting the business in which the Company is
         engaged; and other opportunities or acquisitions which may be pursued
         by the Company.

              Leverage; Ability to Service Debt. The Company is highly
         leveraged. As of November 7, 1998, the Company has total indebtedness
         (including current maturities and capital lease obligations) of $5.3
         billion. Total indebtedness consists of long-term debt, including
         borrowings under the 1998 Senior Credit Facilities, and the notes, and
         capitalized leases. Total indebtedness does not reflect certain
         commitments and contingencies of the Company, including operating
         leases under the lease facility and other operating lease obligations.
         The Company has significant interest and principal repayment
         obligations and significant rental payment obligations, and the ability
         of the Company to satisfy such obligations is subject to prevailing
         economic, financial and business conditions and to other factors, many
         of which are beyond the Company's control. A significant amount of the
         Company's borrowings and rental obligations bear interest at floating
         rates (including borrowings under the 1998 Senior Credit Facilities and
         obligations under the lease facility), which will expose the Company to
         the risk of increased interest and rental rates.

              Merger Integration. The significant increase in size of the
         Company's operations resulting from the recent mergers has
         substantially increased the demands placed upon the Company's
         management, including demands resulting from the need to integrate the
         accounting systems, management information systems, distribution
         systems, manufacturing facilities and other operations of Fred Meyer
         Stores, Smith's, QFC and Ralphs/Food 4 Less. In addition, the Company
         may experience additional unexpected costs from such integration and/or
         a loss of customers or sales as a result of the recent mergers. There
         is no assurance that the Company will be able to maintain the levels of
         operating efficiency which Fred Meyer Stores, Smith's, QFC and
         Ralphs/Food 4 Less had achieved separately prior to the mergers. The
         failure to successfully integrate the operations of the acquired
         businesses, the loss of key management personnel and the loss of
         customers or sales could each have a material adverse effect on the
         Company's results of operations or financial position.

              Ability to Achieve Intended Benefits of the Recent Mergers.
         Management believes that significant business opportunities and cost
         savings are achievable as a result of the Smith's, QFC and Ralphs/Food
         4 Less mergers. Management's estimates of cost savings are based upon
         many assumptions including future sales levels and other operating
         results, the availability of funds for capital expenditures, the timing
         of certain events as well as general industry and business conditions
         and other matters, many of which are beyond the control of the Company.
         Estimates are also based on a management consensus as to what levels of
         purchasing and similar efficiencies should be achievable by an entity
         the size of the Company. Estimates of potential cost savings are
         forward-looking statements that are inherently uncertain. Actual cost
         savings, if any, could differ from those projected and such differences
         could be material; therefore, undue reliance should not be placed upon
         such estimates. There is no assurance that unforeseen costs and
         expenses or other factors (whether arising in connection with the
         integration of the Company's operations or otherwise) will not offset
         the estimated cost savings or other components of the Company's plan or
         result in delays in the realization of certain projected cost savings.

              Competition. The retail merchandising business in general, and the
         supermarket industry in particular, is highly competitive and generally
         characterized by narrow profit margins. The


                                       23
<PAGE>
         Company's competitors in each of its operating divisions include
         national and regional supermarket chains, discount stores, independent
         and specialty grocers, drug and convenience stores, large
         category-dominant stores and the newer "alternative format" food
         stores, including warehouse club stores, deep discount drug stores,
         "supercenters" and conventional department stores. Competitors of the
         Company include, among others, Safeway, Albertson's, Lucky, Costco,
         Wal-Mart and Target. Retail businesses generally compete on the basis
         of location, quality of products and service, price, product variety
         and store condition. The Company's ability to compete depends in part
         on its ability to successfully maintain and remodel existing stores and
         develop new stores in advantageous locations.

              Labor Relations. The Company is party to more than 171 collective
         bargaining agreements with unions and locals, covering approximately
         60,000 employees representing approximately 65% of the Company's total
         employees. Among the contracts that have expired or will expire in 1998
         are those covering 15,500 employees. Typical agreements are three years
         in duration, and as such agreements expire, the Company expects to
         negotiate with the unions and to enter into new collective bargaining
         agreements. There is no assurance, however, that such agreements will
         be reached without work stoppages. A prolonged work stoppage affecting
         a substantial number of stores could have a material adverse effect on
         the Company's results of operations or financial position.


              Forward-looking statements speak only as of the date made. The
         Company undertakes no obligation to publicly release the results of any
         revisions to any forward-looking statements which may be made to
         reflect subsequent events or circumstances or to reflect the occurrence
         of unanticipated events.


                                       24
<PAGE>
                           Part II - OTHER INFORMATION
--------------------------------------------------------------------------------

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------

     (a)  Exhibits

          10G* Employment Agreement between Fred Meyer, Inc. and Robert G.
               Miller, as amended.

          10N* Employment Protection Agreement dated September 22, 1998 between
               Fred Meyer, Inc. and George Golleher.

          10R* Employment Protection Agreement dated September 22, 1998 between
               Fred Meyer, Inc. and certain officers.

          10S* Employment Protection Agreement dated September 22, 1998 between
               Fred Meyer, Inc. and certain officers.

          27   Restated Financial Data Schedule

          *    Previously filed with the quarterly report on Form 10-Q to which
               this amendment relates.

     (b)  Reports on Form 8-K

          The Company filed a report on Form 8-K dated October 18, 1998 to
     disclose information under Item 5 thereof. On November 5, 1998, the Company
     also filed a Form 8-K/A dated March 9, 1998 to amend certain financial
     statement information under Item 7.


                                       25
<PAGE>
                                   Signatures
                                   ----------

          Pursuant to the requirements of the Securities Exchange Act of 1934,
     the registrant has duly caused this report to be signed on its behalf by
     the undersigned thereunto duly authorized.

                                       FRED MEYER, INC.


Date: March 4, 1999                    By JOHN STANDLEY
                                          --------------------------------
                                          John Standley
                                          Senior Vice President and
                                          Chief Financial Officer


                                       26