<PAGE>
                                                 CONFORMED COPY
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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                  FORM 10-K405
(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended ....................DECEMBER 30, 1995
                             OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from ..................... to ...................... 
Commission file number .......................0-16126

                             S P I E G E L,  I N C.
             (Exact name of registrant as specified in its charter)

             DELAWARE                            36-2593917
     (State of Incorporation)                (I.R.S. Employer 
                                            Identification No.)

     3500 LACEY ROAD                              60515-5432
     DOWNERS GROVE, ILLINOIS                      (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code (708) 986-8800 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:



                      CLASS A NON-VOTING COMMON STOCK,
                         PAR VALUE, $1.00 PER SHARE
                               (TITLE OF CLASS)



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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K is not contained herein, and will not be contained, to 
the best of registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K.    X
                               ----

The Class B Voting Common Stock is not publicly traded.  Therefore, no market 
value information is readily available on this class of stock.

The number of the shares of Registrant's Class A Non-Voting Common Stock and 
Class B Voting Common Stock outstanding on March 22, 1996 was 14,604,844 and 
93,141,654, respectively.  

DOCUMENTS INCORPORATED BY REFERENCE:  NONE

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

A.  GENERAL DEVELOPMENT OF BUSINESS

Spiegel, Inc., a Delaware corporation, was incorporated in 1965.  Spiegel, 
Inc. and its subsidiaries are sometimes referred to collectively in this Form 
10-K as the "Company." The Spiegel, Inc. catalog operations and related 
retail store operations are collectively referred to in this Form 10-K as 
"Spiegel." The Company and its predecessors date from 1865.  Since 1905, the 
Company has operated as a catalog merchandiser.  In 1982, the Company was 
purchased by Otto Versand (GmbH & Co) ("Otto Versand"), a privately-held 
German partnership that is one of the largest catalog merchandisers in the 
world, selling its products in Europe and Asia.  In 1984, all of the capital 
stock of the Company was transferred to the partners of Otto Versand or their 
designees.  In this transaction, 65% of the capital stock of the Company was 
transferred to Spiegel Holdings, Ltd., an Illinois limited partnership, whose 
general partner was Dr. Werner Otto.  Since 1984, additional shares of the 
Company's capital stock have been acquired by Spiegel Holdings, Ltd. and its 
successor.  In 1986, Spiegel Holdings, Ltd.  was converted to Spiegel 
Holdings, Inc., a Delaware corporation ("SHI").  Prior to the Company's 1987 
initial public offering of Class A non-voting common stock, all of Spiegel's 
existing capital stock was converted into Class B voting common stock.  SHI 
holds 99.8% of the Company's Class B voting common stock, affording SHI 
control of the Company. 

In 1988, the Company acquired Eddie Bauer, Inc.  and certain related Canadian 
assets (collectively, "Eddie Bauer").  Eddie Bauer is a leading specialty 
retailer serving the casual lifestyle needs of men and women through the sale 
of high quality apparel, home furnishings and accessories through catalogs 
and specialty retail stores. 

In 1990, the Company acquired First Consumers National Bank ("FCNB").  FCNB 
is a special purpose bank limited to the issuance of credit cards, primarily 
FCNB Preferred Charge cards for use by Spiegel, Eddie Bauer and Newport News 
customers. 

In 1993, the Company acquired substantially all of the assets of New Hampton, 
Inc.  ("New Hampton") through a bankruptcy proceeding.  In 1995, New 
Hampton's name was changed to Newport News, Inc. ("Newport News").  Newport 
News is a specialty catalog company offering fashionable women's apparel and 
home furnishings at moderate price points. 

                                        2

<PAGE>

C.  NARRATIVE DESCRIPTION OF BUSINESS

PRINCIPAL PRODUCTS, SERVICES, AND REVENUE SOURCES.  The Company has two 
principal merchandise categories: apparel and household furnishings and other 
merchandise.  The components of net sales by merchandise category for the 
last three years were:

<TABLE>
<CAPTION>

                                  1995       1994      1993 
                                 ------     ------    ------
     <S>                         <C>        <C>       <C>
     Wearing apparel                 71%        73%       72%
     Household furnishings
       and other merchandise         29         27        28
                                 ------     ------    ------
                                    100%       100%      100%
                                 ------     ------    ------
                                 ------     ------    ------
</TABLE>

The Company's household furnishings range from traditional to contemporary 
styles, including accent pieces, decorative accessories, bedding and bath, 
home electronics, window treatments and rugs.  Other merchandise category 
includes items such as fitness and personal care equipment, toys, cameras and 
luggage.

The following is a discussion of the major operations of the Company:  
Spiegel, Eddie Bauer, Newport News and FCNB.

      SPIEGEL 

      Spiegel offers apparel, household furnishings and other merchandise 
      through its various catalogs and, to a lesser extent, Ultimate 
      Outlet retail stores. Spiegel sales were $1,168,959 and $1,202,548 
      for the years ended December 30, 1995 and December 31, 1994, 
      respectively.  Spiegel is one of the largest catalog companies in 
      the United States and in 1995 distributed over 203 million catalogs 
      throughout the country. At December 30, 1995, Spiegel's customer 
      base included 5.9 million active customers (customers who have 
      purchased within the last 18 months). 

      Spiegel's apparel merchandise, which represented 51% of its sales 
      in 1995, includes private-label merchandise, developed by its 
      in-house product design teams based on emerging fashion trends and 
      customer.  Spiegel also offers designer and branded apparel.  
      Spiegel's household furnishings and other merchandise, which 
      represented 49% of its sales in 1995, are a mixture of private 
      label and branded merchandise ranging from traditional to 
      contemporary styles, including accent pieces, decorative 
      accessories, bedding and bath, home electronics, window treatments 
      and rugs. 
      
      Spiegel catalogs serve as a fashion resource for the busy working 
      woman. These catalogs include Spiegel's trademark  semi annual 
      catalog, specialty catalogs targeted to distinct market segments, 
      including E STYLE and For You from Spiegel, and other catalog 
      mailings throughout the year.  The Company has used proprietary and 
      other data from within and outside its existing customer base and 
      its fashion and marketing expertise to identify an assortment of 
      niche markets.  Spiegel addresses each of these markets with 
      targeted specialty merchandise concepts, through specialty catalogs 
      and through "shops" included in Spiegel's semi annual catalog. A 
      shop is a focused merchandise assortment targeted to a specific 
      group of customers. Shops are managed by teams within the Spiegel 
      catalog organization, each comprised of representatives from 
      different areas such as fashion, merchandising, marketing, and 
      advertising.  Spiegel believes that this specialty or niche 
      marketing approach enables it to address the widely varying needs 
      of a diverse customer base. 


                                       3


<PAGE>

      EDDIE BAUER 
      
      Eddie Bauer is a leading specialty retailer serving the casual 
      lifestyle needs of men and women through the sale of high quality 
      private-label apparel, home furnishings and accessories.  Eddie 
      Bauer operates 411 retail stores in addition to catalog operations. 
      Total net sales were $1,427,422 and $1,231,306 for the years ended 
      December 30, 1995 and December 31, 1994, respectively. A key 
      strategy for Eddie Bauer is to leverage synergies between its 
      retail and catalog channels of distribution, maximizing 
      opportunities for cross-promotion.  This strategy includes 
      utilizing the catalog customer database to help identify potential 
      store locations, using catalog space to advertise the retail 
      concept, and utilizing retail store mailing lists to help build the 
      catalog file.  Eddie Bauer's principal retailing concept is its 
      trademark Eddie Bauer sportswear stores and catalogs, which feature 
      casual apparel and accessories.  Eddie Bauer also has other 
      specialty retail concepts that serve targeted niches including 
      Eddie Bauer HOME, which offers home furnishings through retail 
      stores and catalogs; AKA EDDIE BAUER, featuring dress sportswear 
      and tailored clothing, footwear and accessories for men and women 
      through retail stores and catalogs; and the Eddie Bauer Sport Shop, 
      a store-within-a-store concept which provides premier apparel, 
      equipment and accessories for field and stream sports.  
      
      In September 1993, Eddie Bauer entered into a joint-venture 
      arrangement with Otto-Sumisho, Inc.  to sell its full line of Eddie 
      Bauer sportswear products through retail stores and catalogs in 
      Japan.  There are currently seven stores with eight more planned 
      for 1996.  During 1995, Eddie Bauer entered into an agreement with 
      Handelsgesellschaft Heinrich Heine GmbH and Sport-Scheck Gmbh (both 
      subsidiaries of Otto Versand) to form a joint venture to sell Eddie 
      Bauer products through retail stores and catalogs in Germany.  
      Eddie Bauer has also capitalized on selected licensing 
      opportunities, including a current arrangement with Ford Motor 
      Company, which uses the Eddie Bauer name and logo on special series 
      Ford vehicles. 

         EDDIE BAUER RETAIL DIVISION
         
         Eddie Bauer operates 365 retail and 46 outlet stores in the 
         United States and Canada.  At December 30, 1995, 26 of these 
         stores were Eddie Bauer HOME Collection and 15 were AKA EDDIE 
         BAUER stores.  A typical Eddie Bauer store is approximately 
         6,500 gross square feet and is located in an upscale regional 
         mall or a high traffic downtown location, because the Company 
         believes that convenience is a primary consideration for its 
         target customers.  Most of Eddie Bauer's current stores are 
         located in large metropolitan markets. Eddie Bauer has also 
         begun to explore opportunities in certain smaller markets 
         where it believes a concentration of its target customers 
         exists.  Eddie Bauer believes that these markets have the 
         potential to contribute store profit margins comparable to the 
         existing store base. Eddie Bauer outlet stores, which offer 
         overstock and end-of-season merchandise, are located 
         predominantly in outlet malls and strip centers and generally 
         in areas not served by its core specialty retail stores. 
         
         Growth in the retail division has been due principally to new 
         store openings and to the growth in its existing stores.  
         Comparable store sales were unchanged in 1995 and increased 4% 
         in 1994.  In 1996, the Company is planning approximately 27 
         new store openings for Eddie 




                                         4

<PAGE>

         Bauer.  The average cost of opening a typical new Eddie Bauer 
         store in 1995, including inventory, furniture and fixtures, 
         pre-opening expenses and net leasehold improvements, was 
         approximately $800,00.  Eddie Bauer's ability to open and 
         operate new stores profitably is dependent on the availability 
         of suitable store locations, the negotiation of acceptable 
         lease terms, Eddie Bauer's financial resources and its ability 
         to control the operational aspects and personnel requirements 
         of its growth. 
         
         EDDIE BAUER CATALOG DIVISION
         
         In 1995, the Eddie Bauer catalog division distributed over 103 
         million catalogs and had approximately 3.1 million active 
         customers (those who had purchased within the last 18 months.) 
         As a corollary to its retail operations, Eddie Bauer catalog 
         concepts include its trademark Eddie Bauer Sportswear catalog, 
         Eddie Bauer HOME  and AKA EDDIE BAUER, as well as its largest 
         catalog, Eddie Bauer  Resource, combining all of its specialty 
         concepts in a single catalog. Eddie Bauer also actively 
         pursues new customers within its target market through 
         initiatives including list rentals and utilizing names of its 
         retail store customers. 

      NEWPORT NEWS 
      
      Newport News (formerly New Hampton), acquired by the Company in 
      August 1993, is a specialty catalog company whose catalog offers 
      fashionable, moderately priced women's apparel.  Merchandise 
      categories currently include swimwear, dresses, casual wear, 
      evening wear and career wear.  In 1994, Newport News introduced 
      home textiles and in 1996, mailed its first catalog dedicated 
      primarily to home merchandise.  Newport News' consolidated net 
      sales were $289,843 for the year ended December 30, 1995, as 
      compared to $272,937 for the year ended December 31, 1994.  In 
      1995, Newport News mailed 174 million catalogs to active and 
      prospective customers.  Newport News catalogs have a customer base 
      of 4.5 million active customers (those who had purchased within the 
      last 18 months.)
      
      FCNB 
      
      In an effort to build brand loyalty and to provide additional 
      convenience for its customers, the Company offers a credit program 
      for qualifying catalog and retail customers in the form of its FCNB 
      Preferred Charge card.  The card is imprinted with a Spiegel, Eddie 
      Bauer, Newport News, or E STYLE logo depending on the source of the 
      original application for credit.  This card allows a customer to 
      purchase products from any Company affiliate, regardless of the 
      imprint on the card.  FCNB is the issuer of the Preferred Charge 
      card.  The accounts are serviced through FCNB's Beaverton, Oregon 
      headquarters.  FCNB also issues MasterCard credit cards, which 
      represent approximately 6% of its outstanding cards. 
      
      Finance revenues generated by the credit operations were $208,304 
      in 1995, as compared to $232,267 in 1994.  Approximately 50% of the 
      Company's 1995 total net sales were made on the FCNB Preferred 
      Charge card including approximately 76% of Spiegel catalog net 
      sales, 27% of Eddie Bauer's net sales, and 59% of Newport News' net 
      sales.  The lower percentage of Eddie Bauer sales made on the 
      Preferred Charge card is attributable primarily 
      
                                             5
      
<PAGE>
      
      
      to the relatively higher percentage of retail store sales at Eddie Bauer.
      Catalog sales generally have a higher percentage of sales made on credit 
      compared to retail store sales.  


COMMON SYSTEMS STRATEGY 

By capitalizing on synergies between its subsidiaries, the Company continues 
to make significant progress toward its long-term goal of operating common 
systems for the businesses.  The Company operates a common order-entry system 
for Spiegel, Eddie Bauer and Newport News.  This system ensures rapid 
response to customer orders and inquiries and allow Spiegel, Eddie Bauer  and 
Newport News operators to handle each other's calls when back-up support is 
necessary.  In addition, Spiegel and Eddie Bauer share a common 
customer-satisfaction system and a common marketing system for managing their 
customer data base and creating marketing efficiencies and cost savings.  

The Company's transition to its new catalog distribution facility in 
Groveport, Ohio and its common order processing systems is complete.  The 
Company believes the new facility, which serves the catalog fulfillment needs 
of both Eddie Bauer and Spiegel, is among the most technologically advanced 
catalog fulfillment systems in the United States, providing improved 
productivity and customer service. 

PRODUCT DEVELOPMENT AND SOURCING

The Company's product development and sourcing teams are a significant 
element of its private label merchandise strategy.  The Company selects 
manufacturers based on their ability to produce high quality product on a 
cost-effective basis.  The Company's product design teams select and source 
fabrics to be delivered to manufacturers along with product patterns, 
specifications and templates used for cutting fabric and other pre-production 
work.  Prototype samples are submitted to the Company for final production 
approval to ensure manufacturer compliance with specifications.  

The Company does not have any manufacturing facilities; all production is 
done by third-party contractors.  The product development and sourcing teams 
closely monitor the timeliness of manufacturers' delivery to the Company's 
distribution facilities and provide them with packaging information.  The 
Company believes this strategy permits maximum flexibility, enhanced 
inventory management and consistent quality control without the risks 
associated with operating its own manufacturing facilities.  

MERCHANDISE.

The Company sells domestically produced and imported merchandise, which it 
purchases in the open market from approximately 7,600 suppliers, none of 
which supplied as much as 5% of the merchandise purchased during 1995.  A 
significant amount of the dollar value of merchandise purchased by the 
Company is imported directly from the Far East and Europe.  Consequently, the 
Company is subject to the risks generally associated with conducting business 
abroad.  The Company's business could be affected by economic events or 
political instability that might affect imports, including duties, quotas and 
work stoppages.  To date, these factors have not caused any material 
disruption of the Company's operations.  As with other companies that 
denominate purchases in dollars, declines in the dollar relative to foreign 
currencies could over time increase the cost to the Company of merchandise 
purchased in foreign countries, which could adversely affect the Company's 
results of operations.  The Company is unable to predict the effect, 

                                      6

<PAGE>

if any, of the above; however, the Company believes this risk exists for many 
other retailers.

LICENSES AND TRADEMARKS.  

The Company utilizes its own trademarks and tradenames including "Spiegel",
"Eddie Bauer", "AKA EDDIE BAUER", "Eddie Bauer HOME" and "Newport News."  The
Company is also licensed to sell goods under the "Together!" label.  With the
exception of the names "Spiegel", "Eddie Bauer", "AKA EDDIE BAUER", "Eddie Bauer
HOME", "Newport News", and "Together!", the Company believes that loss or
abandonment of any particular trademark would have no significant effect on its
business.

SEASONALITY OF BUSINESS.  

The Company, like other retailers, has experienced and expects to continue to
experience seasonal fluctuations in its merchandise sales and net income. 
Historically, a disproportionate amount of the Company's net sales and a
majority of its net earnings have been realized during the fourth quarter.  If
the Company's sales were materially different from seasonal norms during the
fourth quarter, the Company's annual operating results could be materially
affected.  Accordingly, results for the individual quarters are not necessarily
indicative of the results to be expected for the entire year.

COMPETITION.  

The markets in which the Company participates are highly competitive and served
by a significant number of catalog companies and retailers including traditional
department stores, so-called "off-price" and discount retailers and specialty
chains.  The Company's success is highly dependent upon its ability to maintain
its existing customer lists, solicit new customers, identify distinct fashion
trends and continue to address the needs and fashion tastes of its customers.

EMPLOYEES.  

During 1995, the Company employed between approximately 13,600 and 18,800 full-
time equivalent employees, depending on the time of year, reflecting the
seasonality of the Company's business and the variations in its workforce during
the year.  At February 28, 1996, the Company employed approximately 13,200 full-
time equivalent employees.

Spiegel is a party to three collective bargaining agreements.  Approximately 500
full-time equivalent employees are covered by an agreement between Spiegel and
the Warehouse, Mail Order, Office, Technical and Professional Employees Union,
Local 743, affiliated with the International Brotherhood of Teamsters,
Chauffeurs, Warehousemen, and Helpers of America ("Local 743").  This agreement,
which expired on February 29, 1996, was affected by the closure, in 1995, of
Spiegel's catalog distribution facility in Chicago.  The Company  provided
affected workers with all termination benefits called for by the agreement, as
well as additional benefits such as early retirement enhancements, stay pay, job
counseling and vocational training.  The Company has negotiated a new agreement
with the union and believes it will be accepted by the general union membership.
This agreement would expire on February 28, 1999.


Approximately 140 full-time equivalent employees of certain Spiegel outlet 
stores

                                      7


<PAGE>

are covered by a separate agreement with Local 743.  This agreement expires 
on May 31, 1997.  Approximately 250 full-time equivalent employees are 
covered by an agreement with Teamsters Union 929 Philadelphia, affiliated 
with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen, 
and Helpers of America.  This agreement expired on January 31, 1996.  A new 
agreement has been signed effective February 1, 1996, which will expire on 
January 31, 1999.

The Company considers its relations with its employees to be good and has 
never experienced any material interruption of operations due to labor 
disagreements with its employees.

ITEM 2.  PROPERTIES

The Company's corporate headquarters is located in leased office space in 
Downers Grove, Illinois.  In addition, all of the Company's retail store 
locations are leased, with the exception of a downtown Chicago Eddie Bauer 
store.  A typical store lease is for a term of 10 years, with options for 
renewal.

The Company's new Groveport, Ohio catalog fulfillment and distribution 
facility, which was constructed on land owned by the Company, was completed 
in 1994 and consolidates the majority of catalog fulfillment and distribution 
functions of Spiegel and Eddie Bauer.  The Company made provisions for the 
closing of certain of its previous catalog distribution facilities, as 
described in note 3 to the Company's Consolidated Financial Statements.  The 
principal properties and facilities formerly used in Spiegel's catalog 
operations consist of approximately 20 warehouses and office buildings 
located in and around Chicago, Illinois.  These facilities are primarily 
owned, but as part of the transition to the new warehouse, most of them have 
closed and will be disposed of or sold. In 1995, the Company purchased a four 
million square-foot facility in Columbus, Ohio which replaces its previous 
retail distribution facilities and performs certain catalog distribution 
functions.

Eddie Bauer occupies office space in 9 buildings located in and around 
Redmond, Washington, two of which are owned and seven of which are under 
lease.  Eddie Bauer built an addition to its headquarters in 1995.  The 
Company also owns a building in San Francisco, but has closed the retail 
store which used to operate in it.

Spiegel leases customer order centers in Reno, Nevada; Bensalem, 
Pennsylvania; and Wichita, Kansas, and customer service facilities in Rapid 
City, South Dakota and Oakbrook, Illinois. The Company owns its Westmont, 
Illinois corporate data center. 

Newport News leases office space in New York, New York.  Its order taking, 
customer service and administrative functions are performed in a leased 
facility, and its distribution function is performed in an owned facility, 
both of which are located in Hampton, Virginia.  Newport News also owns 
approximately 62 acres of vacant land in Hampton, Virginia adjacent to its 
distribution facility.  At present, there are no plans to either expand upon 
or dispose of this vacant land.

FCNB's headquarters is located in leased office space in Beaverton, Oregon 
(suburban Portland). 

The Company considers its present space and facilities under development 
adequate for anticipated future requirements.  

                                         8

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

The Company is routinely involved in a number of legal proceedings and claims
that cover a wide range of matters.  In the opinion of management, the outcome
of these matters is not expected to have any material adverse effect on the
consolidated financial position or results of operations of the Company.

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

None.


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

a.  MARKET INFORMATION.

The Class A Non-Voting Common Stock is traded on NASDAQ's National Market
System.  The ticker symbol is SPGLA.  Daily trading information is listed in the
stock tables carried by major newspapers as "SPIEGEL".  See Item 8 "Selected
Quarterly Financial Data" for information on the high and low sales prices of
the Class A Non-Voting Common Stock.

On March 22, 1996, the closing market price of the Class A Non-Voting Common
Stock, as quoted on the NASDAQ National Market System, was $10 per share.

b.  HOLDERS

There were approximately 12,000 Class A Non-Voting Common Stockholders as of
March 22, 1996.  The Company believes that certain of the outstanding shares of
Class A Non-Voting Common Stock are held by nominees for an unknown number of
beneficial stockholders.

The Class B Voting Common Stock of the Company is privately held and is not
publicly traded.  As of the date hereof, there were four Class B Voting Common
Stockholders.

c.  DIVIDENDS

In December 1995, the Company announced it will discontinue payment of all cash
dividends.  The Company will continue to evaluate its dividend policy on an
ongoing basis.  Cash dividends per share paid for the years ended December 30,
1995 and December 31, 1994 are as follows:

<TABLE>
<CAPTION>

                      First   Second    Third     Fourth
                     Quarter  Quarter   Quarter   Quarter   Total
                     -------  -------   -------   -------   ------
<S>                  <C>      <C>       <C>       <C>       <C>
1995                 $.050    $.050     $.050     $.050     $.200
1994                 $.050    $.050     $.050     $.050     $.200

</TABLE>

                                      9

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

Five-Year Selected Financial Data

($000s omitted, except per share amounts)

<TABLE>
<CAPTION>


                              1995         1994         1993 (2)     1992         1991
                          -----------   ----------    ----------   ----------   ----------
<S>                       <C>           <C>           <C>          <C>          <C>
EARNINGS DATA 
Net sales and 
  other revenues          $3,184,184    $3,015,985    $2,596,147   $2,218,732   $1,976,308
Earnings (loss) before       
  income taxes (1)           (15,807)       47,246        87,363       69,367       30,793
Net earnings   
   (loss) (3)             $   (9,481)   $   25,100    $   48,705   $   43,224   $   16,921
Net earnings (loss) per 
  common share(3,4)       $     (.09)   $      .23    $      .47   $      .42   $      .16
Cash dividends per 
  common share (4)        $      .20    $      .20    $      .20   $      .18   $      .18

BALANCE SHEET DATA
Current assets            $1,530,277    $1,908,402    $1,592,665   $1,302,838   $1,305,217
Total assets               2,273,982     2,560,287     2,210,591    1,785,213    1,728,163
Current liabilities          666,448       628,346       627,247      495,131      374,768
Long-term debt,
 excluding
 current maturities        1,014,692     1,300,364       971,683      764,235      841,196
Stockholders' equity      $  535,573    $  579,217    $  567,485   $  478,345    $ 453,598

</TABLE>

(1). Operating income for 1993 included a $39,000 charge recorded in the third
quarter to reflect the estimated impact of closing certain of the Company's
existing catalog distribution facilities.

(2). In August 1993, the Company purchased substantially all of the assets of
Newport News, Inc. for approximately $40 million.  The operating results and
balance sheet data for Newport News are consolidated with the Company's from
this time forward.

(3). Net earnings for 1992 include income of $4,101, or $.04 per share, for the
cumulative effect of accounting changes for postretirement health care benefits
and inventory overhead capitalization.

(4). Net earnings per common share and cash dividends per common share for 1991
and 1992 have been restated to reflect the two-for-one split in the Company's
outstanding common stock effected by the 100% stock dividend declared and paid
in 1993.

                                      10

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS  ($000S OMITTED)

RESULTS OF OPERATIONS

The following table sets forth certain items from the Company's consolidated
financial statements as a percent of total revenues or net sales for the fiscal
years 1995, 1994 and 1993.

<TABLE>
<CAPTION>

                                               1995         1994       1993
                                             --------     --------   --------
<S>                                          <C>          <C>        <C>
Net sales and other revenues:
  Net sales                                    90.7%         89.7%      90.0%
  Finance revenue                               6.5%          7.7%       7.5%
  Other revenue                                 2.8%          2.6%       2.5%
                                             --------     --------   --------
                                              100.0%        100.0%     100.0%
Gross profit as a percent of net sales         32.9%         33.8%      34.3%
Selling, general and 
  administrative expenses as a                    
  percent of total revenues                    36.4%         36.2%      33.2%

</TABLE>

1995 COMPARED WITH 1994

Net sales for the year ended December 30, 1995 increased 7% to $2,886,225
compared with $2,706,791 for the year ended December 31, 1994.  For the year
ended December 30, 1995, total Company catalog sales were $1,751,526, an
increase of  1%  compared with the year ended December 31, 1994 due primarily to
higher average demand per order.  This sales increase was achieved despite a 10%
decline in the number of catalogs circulated to offset higher paper and postage
costs.  Retail sales of $1,134,699 for the year ended December 30, 1995
increased  18% compared with the year ended December 31, 1994.  This increase
was due to a higher number of Eddie Bauer stores, 411 at December 30, 1995
compared to 353 at December 31, 1994, as Eddie Bauer's 1995 comparable store
sales were unchanged compared to 1994.   

For the year ended December 30, 1995, finance revenue  was $208,304 compared to
$232,267 for the year ended December 31, 1994.  This decrease was due to a 19%
decline in average owned receivables outstanding offset by the effects of an
increase in the late fees and other fees charged to proprietary credit customers
as a result of a change in fee structure.  Other revenue was $89,655 and $76,927
for the years ended December 30, 1995 and December 31, 1994, respectively, and
primarily comprises consulting revenue from the Company's computer consulting
subsidiary, handling charge fees, and gains recognized on the sale of customer
receivables.   

Gross profit margin on net sales for the year ended December 30, 1995 was 32.9%
compared with 33.8% for the year ended December 31, 1994.  The Company incurred
significant markdowns in the first half of 1995 to liquidate merchandise
overstocks created from soft demand for cold weather apparel in the fourth
quarter of 1994.  In addition, the Company continues to experience a shift in
catalog sales from apparel merchandise, which has a relatively higher gross
profit margin, to home merchandise with a relatively lower gross


                                          11

<PAGE>

profit margin. The fourth quarter saw a significant improvement in gross 
profit margins, primarily for Eddie Bauer due to lower overstock positions 
resulting in lower markdowns as compared to last year.  

Selling, general and administrative expenses represented 36.4% of total 
revenues for the year ended December 30, 1995 as compared to 36.2% for the 
year ended December 31, 1994.  There was a 14% increase in postal rates, and 
paper prices rose more than 40% for the Company in 1995.  In an effort to 
minimize the effects of these increases, the Company took several measures 
including reducing the number of catalogs circulated, utilizing lower paper 
weights, and reducing the dimensions and page counts of the catalogs.  In 
addition, there has been an increase in the charge-off rate for the 
proprietary credit card portfolio resulting from industry trends toward 
higher charge-offs as well as a shift in the portfolio mix toward higher 
levels of new credit accounts, which typically carry a higher credit risk 
than the more matured segment of the portfolio.  The effects of this increase 
were mitigated by the favorable impact of the sale of customer receivables in 
1995 as compared to 1994.  Finally, the Company incurred higher warehouse 
costs, especially in the first half of the year, related to the final 
transition to the new catalog distribution facility and the start-up of the 
new retail distribution facility.  In the second half of the year, especially 
the fourth quarter, the Company experienced cost savings in its distribution 
operations as compared to prior years, and improvements in certain other 
operating units, selling, general and administrative expense ratios due to 
expense control programs.  
 
The Company recorded a $39,000 nonrecurring charge in the third quarter of 
1993 to provide for the estimated impact of closing certain of the Company's 
existing catalog distribution facilities.  Approximately $31,300 of 
expenditures have been made to date, including certain termination benefits, 
the impact on net periodic pension cost, and other incremental costs incurred 
for closing the existing facilities.  The Company added $2,400 to the reserve 
in 1995 for additional costs in excess of the original estimate.  The total 
remaining reserve at December 30, 1995 include the noncash write-off of 
property and equipment with an approximate book value of $5,000.  

Interest expense for the year ended December 30, 1995 was $103,177, compared 
to $85,380 for the year ended December 31, 1994.  The increase was due in 
almost equal proportions to higher debt levels and higher effective interest 
rates. The increase in debt was used primarily to finance capital 
expenditures and higher average inventory levels.  

The effective tax rate for 1995 was 40.0% as compared to 46.9% in 1994.  This 
decrease was due to a reduction in the state effective tax rate, the relative 
impact of the amortization of nondeductible goodwill as a percentage of loss 
before taxes, and the effect of changes in estimates of previously provided 
taxes. 

                                       12

<PAGE>

                              1994 COMPARED WITH 1993

Net sales for the year ended December 31, 1994 increased 16% to $2,706,791 
compared with $2,337,235 for the year ended December 31, 1993.  Total Company 
catalog sales of $1,742,131 increased 16% for the year ended December 31, 
1994 compared with the year ended December 31, 1993, due in part to increases 
in the home areas and certain categories of women's apparel as well as the 
effect of a whole year of Newport News sales.  Retail sales of $964,660 for 
the year ended December 31, 1994 increased $124,488 or 15%, compared with the 
year ended December 31, 1993, due primarily to an increase in the number of 
Eddie Bauer stores to 353 at December 31, 1994 from 294 at December 31, 1993. 
 Additionally, Eddie Bauer's comparable store sales increased 4%.  Despite 
the increases noted above, total company sales fell below management 
expectations, especially in the critical fourth quarter, due to lack of 
demand for cold weather apparel and accessories, and softness in certain 
women's apparel categories. 

Finance revenue increased $37,283 or 19.1% for the year ended December 31, 
1994 compared to the year ended December 31, 1993, due to a larger FCNB 
Preferred Charge card receivable portfolio throughout the 1994 period 
compared to 1993. This increase was attributable to an increase in the number 
of Preferred Charge accounts as a result of the successful introduction of 
the Preferred Card to Newport News customers in 1994 and significant credit 
customer acquisition efforts at Spiegel and Eddie Bauer.  Other revenue for 
the years ended December 31, 1994 and 1993 was $76,927 and $63,928, 
respectively, and primarily comprises handling charge fees, consulting 
revenue and, in 1994, a gain recognized on the sale of customer receivables.

Gross profit margin on net sales for the year ended December 31, 1994 was 
33.8% compared with 34.3% for the year ended December 31, 1993.  This decline 
was primarily due to a higher level of promotional and markdown activity, 
especially in the fourth quarter of 1994 as compared to the same period of 
1993.  These markdowns were taken in an effort to dispose of potential 
overstock inventory as sales were below expectations during this critical 
period of the Company's operating cycle.

Selling, general and administrative expenses as a percent to total revenues 
for the year ended December 31, 1994 and 1993 were 36.2% and 33.2%, 
respectively. This increase reflected the higher advertising and circulation 
costs associated with the Company's planned strategy of increasing market 
share through aggressive new catalog customer acquisition programs.  Results 
also reflect the incremental expenses incurred from the conversion to a new 
common order fulfillment system and dual operating expenses associated with 
the start-up of and transition to a new catalog distribution facility for 
Eddie Bauer and Spiegel.  Eddie Bauer completed its transition to the new 
facility during the third quarter of 1994.  Spiegel began initial shipments 
out of the facility in 1994 and completed its transition during 1995.  

Through December 31, 1994, approximately $23,000 of expenditures had been 
made on the $39,000 reserve for the estimated impact of closing certain of 
the Company's existing catalog distribution facilities including certain 
termination benefits and the impact on net periodic pension cost.

Interest expense for the year ended December 31, 1994 was $85,380 compared to
$72,225 for the year ended December 31, 1993.  The increase was due to higher

                                    13

<PAGE>

debt levels and by slightly higher effective interest rates.  The increase in 
debt was used primarily to finance higher average levels of customer accounts 
receivable, higher average inventory levels and capital expenditures. 

The effective tax rate for 1994 was 46.9% as compared to 44.2% in 1993.  This 
increase was due to an increase in state income tax rates as well as the 
relative impact of the amortization of non-deductible goodwill as a 
percentage of earnings before taxes.

                                      
                          LIQUIDITY AND CAPITAL RESOURCES

The Company has historically met its operating and cash requirements through 
funds generated from operations, the sale of customer receivables and the 
issuance of debt.  Customer accounts receivable sold were $1,180,000 and 
$480,000 at December 30, 1995 and December 31, 1994, respectively.  

Net cash provided by operating activities was $438,601 for the year ended 
December 30, 1995 as compared to net cash used in operating activities of 
$245,849 in the comparable prior year period.  The most significant source of 
operating cash in 1995 was the sale of $700,000 of customer receivables, 
which was offset by a $316,752 increase in customer accounts receivable 
before the current year's receivable sales.  In 1994, there was significant 
use of cash for an increase in customer receivables of $277,203 and an 
increase in inventories of $162,526.  These were partially offset by proceeds 
from the sale of $150,000 customer receivables in 1994.

In the past three years, the Company has incurred substantial capital 
expenditures to improve its infrastructure.  Capital expenditures for 1995 
and 1994 were $131,229 and $84,191, respectively.  In 1994, the expenditures 
were primarily related to the new catalog distribution center and the 
continued expansion and remodeling of Eddie Bauer stores.  In 1995, the 
Company's capital expenditures were primarily related to the expansion of 
Eddie Bauer including the purchase and renovation of a new retail 
distribution facility, the construction of a headquarters addition, and 
continued expansion and remodeling of Eddie Bauer stores.  The majority of 
those projects are completed and spending levels will be reduced 
significantly in the coming years. 

As of December 30, 1995, total debt was $1,126,364, compared with $1,380,684 
as of December 31, 1994.  This lower level of debt was primarily the result 
of payments made on commercial paper using the proceeds from the sale of 
customer receivables.

In March 1995, Statement of Financial Accounting Standards No. 121, 
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets 
to Be Disposed Of, was issued.  This statement establishes accounting 
standards for the recognition of losses resulting from impairment of 
long-lived assets to be held and used or to be disposed of.  The statement 
will be adopted by the Company in the 1996 fiscal year, as required.  
Management believes that the effects of adoption of this statement will be 
immaterial.  

In October 1995, Statement of Financial Accounting Standards No. 123, 
Accounting for Stock Based Compensation, was issued.  This statement 
establishes financial accounting and reporting standards for stock based 

                                  14

<PAGE>

employee compensation plans on a fair value based method.  As allowed by the 
new Statement, the Company plans to continue to use Accounting Principles 
Board Opinion No. 25, "Accounting for Stock Issued to Employees" in 
accounting for its stock options and will supplementally make pro forma 
disclosures as if the fair value based method of accounting had been applied 
according to the Statement.  The Company will adopt the provisions of the 
statement in 1996, as required.  

The Company believes that its cash on hand, together with cash flow 
anticipated to be generated from operations, borrowings under its existing 
credit facilities and other available sources of credit will be adequate to 
fund the Company's capital and operating requirements for the foreseeable 
future.


                                    15

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED BALANCE SHEETS
($000s omitted, except per share amounts)

<TABLE>
<CAPTION>

                                                 December 30,   December 31,
                                                     1995          1994
                                                 ------------  --------------
<S>                                              <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents                       $   42,302     $   33,439
  Receivables, net                                   742,480      1,125,728
  Inventories                                        572,377        597,781
  Prepaid expenses                                   101,324         80,970
  Refundable income taxes                             29,560         24,904
  Deferred income taxes                               42,234         45,580
                                                -------------  --------------
    Total current assets                           1,530,277      1,908,402
Property and equipment, net                          412,934        335,103
Intangible assets, net                               173,088        180,446
Other assets                                         157,683        136,336
                                                -------------  --------------
                                                  $2,273,982     $2,560,287  
                                                -------------  --------------
                                                -------------  --------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current maturities of debt                      $  111,672    $    80,320 
  Accounts payable                                   256,527        265,752
  Accrued liabilities:
    Salaries and wages                                32,370         31,114
    General taxes                                    125,504        118,266
    Other accrued liabilities                        140,375        132,894
                                                -------------  --------------
    Total current liabilities                        666,448        628,346
Long-term debt, excluding current maturities         994,692      1,300,364
Indebtedness to related parties                       20,000              -

Deferred income taxes                                 57,269         52,360              
                                                -------------  --------------
    Total liabilities                              1,738,409      1,981,070
                                                -------------  --------------
Stockholders' equity:
  Class A non-voting common stock, $1.00 par
    value; authorized 16,000,000 shares; 
    14,604,844 shares issued and outstanding 
    at December 30, 1995; 15,065,244 shares 
    issued and outstanding at December 31, 1994       14,605         15,065
  Class B voting common stock, $1.00 par value;
    authorized 94,000,000 shares; 93,141,654 
    shares issued and outstanding at 
    December 30, 1995 and December 31, 1994           93,142         93,142
  Additional paid-in capital                         211,761        215,800
  Minimum pension liability                           (8,650)          (566) 
  Retained earnings                                  224,715        255,776
                                                -------------  --------------
    Total stockholders' equity                       535,573        579,217  
                                                -------------  --------------
                                                  $2,273,982     $2,560,287  
                                                -------------  --------------
                                                -------------  --------------

</TABLE>

See accompanying notes to consolidated financial statements.

                                           16

<PAGE>

CONSOLIDATED STATEMENTS OF EARNINGS

Years ended ($000s omitted, except per share amounts)

<TABLE>
<CAPTION>
                                December 30,    December 31,      December 31,
                                    1995            1994             1993
                                ------------    ------------      ------------
<S>                              <C>             <C>               <C>
NET SALES AND OTHER REVENUES
Net sales                       $2,886,225      $2,706,791        $2,337,235 
Finance revenue                    208,304         232,267           194,984
Other revenue                       89,655          76,927            63,928
                                ------------    ------------      ------------
                                 3,184,184       3,015,985         2,596,147

COST OF SALES AND OPERATING 
 EXPENSES
Cost of sales, including buying  
  and occupancy expenses         1,936,366       1,790,722         1,536,642
Selling, general and 
  administrative expenses        1,160,448       1,092,637           860,917
Nonrecurring charge                      -               -            39,000
                                ------------    ------------      ------------
                                 3,096,814       2,883,359         2,436,559

  Operating income                  87,370         132,626           159,588

Interest expense                   103,177          85,380            72,225
                                ------------    ------------      ------------
  Earnings (loss) before
    income taxes                   (15,807)         47,246            87,363

Income tax provision (benefit)      (6,326)         22,146            38,658
                                ------------    ------------      ------------
Net earnings (loss)              $  (9,481)      $  25,100         $  48,705
                                ------------    ------------      ------------
                                ------------    ------------      ------------

EARNINGS PER COMMON SHARE
Net earnings (loss) per
common share                    $   (0.09)      $     0.23        $     0.47
                                ------------    ------------      ------------
                                ------------    ------------      ------------

</TABLE>

See accompanying notes to consolidated financial statements.

                                     17

<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

($000s omitted, except per share amounts)

<TABLE>
<CAPTION>

                                                                                        Treasury
                                                                                        stock -
                                  Class A       Class B       Additional               class A        Minimum
                                  non-voting    voting        paid-in      Retained    non-voting     pension
                        Total     common stock  common stock  capital      earnings    common stock   liability
                        -------   ------------  ------------  ----------   ----------  ------------   ---------
<S>                     <C>        <C>           <C>           <C>         <C>          <C>           <C>
BALANCES AT           
  DECEMBER 31, 1992    $478,345   $  12,000     $  93,142     $154,333     $223,906       $  (5,036)    $    - 
Net earnings             48,705                                              48,705
Cash dividends
  ($.20.per share)      (20,298)                                            (20,298)
Issuance of 3,627,600
  common shares          61,705       3,628                     58,077
Issuance of 109,220
  treasury shares           627                                    144                          483
Retirement of 1,027,776
  treasury shares            -       (1,028)                    (3,525)                       4,553       
Adjustment to minimum  
  pension liability      (1,599)                                                                         (1,599)
                        -------   ------------  ------------   ----------   ----------  ------------   ---------
BALANCES AT            
  DECEMBER 31, 1993     567,485      14,600         93,142      209,029      252,313           -         (1,599)
                       
Net earnings             25,100                                               25,100
Cash dividends         
  ($.20 per share)      (21,637)                                             (21,637)
Issuance of 465,420    
  common shares           7,236         465                      6,771
Adjustment to minimum  
  pension liability       1,033                                                                           1,033
                        -------   ------------  ------------   ----------   ----------  ------------   ---------
BALANCES AT            
  DECEMBER 31, 1994     579,217      15,065         93,142     215,800       255,776           -         (566)
                       
Net loss                 (9,481)                                              (9,481)
Cash dividends                                                                    
  ($.20 per share)      (21,580)                                             (21,580)
Issuance of 39,600     
  common shares             243          40                        203
Purchase & retirement    
  of 500,000           
  common shares          (4,742)       (500)                    (4,242) 
Adjustment to minimum  
  pension liability      (8,084)                                                                          (8,084)
                        -------   ------------  ------------   ----------   ----------  ------------   ---------
                       
BALANCES AT            
  DECEMBER 30, 1995    $535,573    $ 14,605       $ 93,142     $ 211,761     $224,715     $    -         $(8,650)
                        -------   ------------  ------------   ----------   ----------  ------------   ---------
                        -------   ------------  ------------   ----------   ----------  ------------   ---------

</TABLE>

See accompanying notes to consolidated financial statements.

                                           18

<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended ($000s omitted)

<TABLE>
<CAPTION>

                                               December 30,         December 31,      December 31,
                                                  1995                 1994              1993 
                                              -------------        -------------      ------------
<S>                                            <C>                  <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)                             $    (9,481)        $   25,100         $   48,705
Adjustments to reconcile net earnings to 
  net cash provided by (used in) 
  operating activities:
  Depreciation and amortization                      76,155             54,607             45,766
  Gain on sale of receivables                       (18,637)           (10,658)               - 
  Write-down of property and 
    equipment of certain 
    distribution facilities                             -                  -                6,500
  Change in assets and liabilities,
    net of effects of acquisition:
    Sale of customer accounts receivable            700,000            150,000             32,756
    Increase in receivables, net                   (316,752)          (277,203)          (209,800)
    (Increase) decrease in inventories               25,404           (162,526)             2,447
    Increase in prepaid expenses                    (20,354)           (21,125)            (1,272)
    Increase (decrease)in accounts payable           (9,224)            39,441             44,553 
    Increase in accrued liabilities                   2,514             11,264             59,678
    Increase (decrease) in income taxes               8,976            (54,749)            (6,707) 
                                               ------------         -------------      -------------
    Total adjustments                               448,082           (270,949)           (26,079)
                                               ------------         -------------      -------------
   Net cash provided by (used in)                                     
    operating activities                           438,601            (245,849)            22,626 
                                               ------------         -------------      -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Newport News,net of cash acquired       -                   -              (39,492)
Net additions to property and equipment           (131,229)            (84,191)          (104,489)
Net (additions to) or reductions of other
    assets                                         (18,110)             10,642            (61,944)
                                               ------------         -------------      -------------
  Net cash used in investing activities           (149,339)            (73,549)          (205,925)
                                               ------------         -------------      -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of debt                                   116,250             399,000            241,600
Payment of debt                                   (370,570)            (79,151)           (56,550)
Dividends paid                                     (21,580)            (21,637)           (20,298)
Purchase and retirement of common shares            (4,742)                -                  -
Issuance of common shares and other                    243               7,236             62,332
                                               ------------         -------------      -------------
Net cash provided by (used in) 
  financing activities                            (280,399)            305,448            227,084
                                               ------------         -------------      -------------
    Net change in cash and cash equivalents          8,863             (13,950)            43,785
Cash and cash equivalents at
  beginning of year                                 33,439              47,389              3,604
Cash and cash equivalents                      ------------         -------------      -------------
   at end of year                               $   42,302          $   33,439          $  47,389
                                               -------------        -------------      -------------
                                               -------------        -------------      -------------
                                                                                                   
Supplemental cash flow information
 Cash paid during the year for:
    Interest                                    $  104,426          $   85,723          $  69,242
                                               -------------        -------------      -------------
    Income taxes                                $    6,092          $   66,702          $  41,035
                                               -------------        -------------      -------------

</TABLE>

See accompanying notes to consolidated financial statements.

                                         19

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($000s omitted, except per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS
Spiegel, Inc. is a multi-channel speciality retailer marketing fashionable
apparel and home furnishings through catalogs, specialty retail stores and
electronic media.  The Company also operates a special purpose bank which issues
a proprietary credit card to the Company's customers.

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 liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.  Actual results
could differ from those estimates.

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Spiegel, Inc. and
its wholly-owned subsidiaries (the Company).  All significant transactions and
balances among the companies included in the consolidated financial statements
have been eliminated in consolidation. In 1994, the Company modified its year
for financial reporting purposes from calendar periods to a 52/53 week fiscal
year.

REVENUE RECOGNITION
Sales made under installment accounts represent a substantial portion of net
sales. Finance revenue on customer installment accounts receivable is recorded
as income when earned.  The Company provides for returns at the time of sale
based upon projected merchandise returns.

CASH EQUIVALENTS
Cash equivalents consist principally of highly liquid government securities with
original maturities of three months or less.

INVENTORIES 
Inventories, principally merchandise available for sale, are stated at the lower
of cost or market. Cost is determined primarily by the average cost method or by
the first-in, first-out method.

ADVERTISING COSTS 
Costs incurred for the production and distribution of direct response catalogs
are capitalized and amortized over the expected lives of the catalogs, which are
less than one year. Unamortized costs as of December 30, 1995 and December 31,
1994 were $65,343 and $51,524, respectively. All other advertising for both
catalog and retail operations is expensed as incurred.  Total advertising
expense in the fiscal years 1995, 1994 and 1993 was $439,380, $430,180, and
$290,460, respectively.

STORE PREOPENING COSTS 
Preopening and start-up costs for new stores are charged to operations as
incurred.

                                       20

<PAGE>

PROPERTY AND EQUIPMENT 
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation of property and equipment is computed using the
straight-line method over the estimated useful lives of the assets. Annual
depreciation rates range from 4% to 20% for buildings and improvements and 10%
to 50% for furniture and equipment. Leasehold improvements are amortized over
the lesser of the term of the lease or asset life.

INTANGIBLE ASSETS
Intangible assets represent principally trademarks and the excess of cost over
the fair market value of net assets of businesses purchased.  On an annual
basis, the Company amortizes these intangibles on a straight-line basis in
relation to the anticipated  benefits to be derived from the businesses
acquired, not to exceed 40 years. Total accumulated amortization of these
intangibles was $64,099 and $55,843 at December 30, 1995 and December 31, 1994,
respectively.  Management periodically considers whether there has been a
permanent impairment in the value of goodwill and trademarks by evaluating
various factors, including current and projected future operating results and
undiscounted cash flows.  The Company does not believe there has been any
material impairment in the carrying value of its goodwill.

DERIVATIVE FINANCIAL INSTRUMENTS
The Company's current derivative positions consist of interest rate swaps.  The
accounting treatment for these interest rate swaps is to record the net interest
paid as an adjustment to interest expense on a current basis.  Gains or losses
resulting from market movements are not recognized.

SYSTEMS DEVELOPMENT COSTS
Significant systems development costs are capitalized and amortized on a
straight-line basis over a three year period.  Costs, net of amortization,
included in other assets as of December 30, 1995 and December 31, 1994 were
$33,661 and $30,760, respectively.  Related amortization expense recognized in
fiscal years 1995, 1994 and 1993 was $8,887, $4,069, and $2,736, respectively.

EMPLOYEE PENSION PLANS
Company policy is to, at a minimum, fund the pension plans to meet the
requirements of the Employee Retirement Income Security Act of 1974 (ERISA). 

INCOME TAXES
Deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The Company is included in the consolidated federal
income tax return of Spiegel, Inc.'s majority shareholder, Spiegel Holdings,
Inc.

EARNINGS PER SHARE    
Earnings per share are based on the weighted average number of both classes of
common shares outstanding during the year.

RECLASSIFICATIONS
Certain prior year amounts have been reclassified from amounts previously
reported to conform with the 1995 presentation.

2. ACQUISITION

On August 27, 1993, the Company acquired substantially all of the assets of
Newport News, Inc. (formally New Hampton, Inc.) through a bankruptcy proceeding
for approximately $40

                                      21

<PAGE>

million in cash. Newport News, Inc. is a specialty catalog company offering 
fashionable, moderately priced women's apparel. The fair value of assets 
acquired approximated the purchase price. Accordingly, goodwill has not been 
recorded. The operating results of Newport News, Inc. subsequent to the 
acquisition date are included in the consolidated financial statements of the 
Company.

3. NONRECURRING CHARGES

During 1994 and 1995, the Company relocated certain of its catalog distribution
operations to a new facility in Groveport, Ohio, which consolidated the majority
of catalog distribution functions of Spiegel and Eddie Bauer. Included in
operating results for the third quarter of 1993 was a $39,000 nonrecurring
charge for the estimated costs for closure of certain of the Company's existing
catalog distribution facilities. The charge to earnings consisted of estimates
for termination benefits, disposal of certain fixed assets and other related
costs.  Approximately $31,300 of expenditures have been made to date, primarily
for certain employee termination benefits, the impact on net periodic pension
costs, and other incremental costs incurred for closing the existing facilities.
Included in the original reserve was $6,500 for the closing of certain
warehouse facilities and $1,500 of this was used in 1995.  The remaining $5,000
is expected to be used in 1996.  In 1995, $2,400 was added to the reserve for
additional costs expected in excess of the original reserve.

4. RECEIVABLES

Receivables consist principally of proprietary credit card receivables generated
in connection with the sale of the Company's merchandise. The Company's customer
base is diverse, in terms of both geographic and demographic coverage. Due to
the revolving nature of the credit card portfolio, management believes that the
current carrying value of credit card receivables approximates fair value.  The
average interest rate collected on the receivables approximates the current
market rates on new accounts.  The allowance for credit card losses is based
upon management's evaluation of the collectibility of credit card receivables
after giving consideration to current delinquency data, historical loss
experience and general economic conditions.  This allowance is continually
reviewed by management, however, the actual losses incurred may differ from
these estimates.

Receivables at December 30, 1995 and December 31, 1994 consist of the following:

<TABLE>
<CAPTION>

                                                       1995              1994
                                                    ------------     --------------
<S>                                                  <C>              <C>
Receivables serviced                                 $2,001,081      $1,683,444
Receivables sold                                     (1,180,000)       (480,000)
                                                    ------------     --------------
Receivables owned                                       821,081       1,203,444
Less allowance for returns                              (37,769)        (27,762)
Less allowance for doubtful accounts                    (40,832)        (49,954)
                                                    ------------     --------------
Receivables, net                                     $  742,480      $1,125,728
                                                    ------------     --------------
                                                    ------------     --------------

</TABLE>

During 1995, 1994, and 1992, the Company transferred portions of its customer
receivables to trusts which, in turn, sold certificates representing undivided
interests in the trusts to investors.  Certificates sold were $700,000 in 1995,
under two separate transactions of $350,000 each, and $150,000 and  $330,000 in
1994 and 1992, respectively.  As a result of these transactions, other revenue
increased by $18,637 and $10,658 in 1995 and 1994, respectively, representing
the gain on only the sold receivables that existed at the date

                                       22

<PAGE>


of the sale.  The receivables were sold without recourse, and the bad debt 
reserve related to the net receivables sold has been reduced accordingly.  
Cash flows generated from the receivables in the trusts are, to the extent 
allocable to the investor percentage, applied to payment of interest on the 
certificates, reinvestment in additional receivables to maintain the 
investors' percentage, and payment of servicing fees to the Company.  Excess 
cash flows revert to the Company.  The Company owns the remaining undivided 
interest in the trusts not represented by the certificates and will continue 
to service all receivables for the trusts.  

In addition to the certificates sold, an additional class of investor 
certificates, currently held by the Company, was issued by the trust in each 
of the transactions in 1995 and 1994.  The aggregate principle balances for 
these certificates was $294,500 and $55,000 as of December 30, 1995 and 
December 31, 1994, respectively.  The value of these certificates is included 
in the Company's balance sheet under "Receivables, net."  The Company also 
held a total of $49,400 at December 30, 1995 and December 31, 1994 in reserve 
funds used as credit enhancement for related receivables sold during 1992.  
Restricted cash accounts have been maintained for these reserve funds, none 
of which has been utilized as of December 30, 1995.  The value of these funds 
has been included in the Company's balance sheet under "Other assets."  

5. PROPERTY AND EQUIPMENT

Property and equipment at December 30, 1995 and December 31, 1994 consist of the
following:


<TABLE>
<CAPTION>


                                            1995              1994 
                                         -----------      -----------
<S>                                      <C>              <C>
Land                                     $   22,957       $  19,685
Buildings and improvements                  155,150         123,512
Equipment                                   232,147         182,921
Leasehold improvements                      148,031         130,958
                                         -----------      -----------
                                            558,285         457,076
Less accumulated depreciation 
  and amortization                         (171,791)       (147,160)
                                         -----------      -----------
                                            386,494         309,916
Construction in process                      26,440          25,187
                                         -----------      -----------
Property and equipment, net               $ 412,934        $335,103
                                         -----------      -----------
                                         -----------      -----------

</TABLE>

                                        23

<PAGE>

6. LONG-TERM DEBT

The following is a summary of the Company's long-term debt at December 30, 
1995 and December 31, 1994:

<TABLE>
<CAPTION>

                                                 1995               1994
                                              -----------       -----------
<S>                                            <C>               <C>
Notes payable:
  Commercial paper, supported by 
    stand-by credit commitment                $ 250,000          $504,000
  Term loan agreements, 3.00% to 10.25%, 
    due March 22, 1996                      
    through March 31, 2005                      642,614           687,934
  Indebtedness to related parties                45,000                -
Subordinated notes, 6.56% to 9.625%, 
  due June 28, 1996
  through June 30, 2000                         128,750           128,750
Secured notes, 7.25% to 7.35%, 
  due November 15, 2001 through                                        
  November 15, 2005                              60,000            60,000 
                                             -----------       -----------
  Total long-term debt                        1,126,364         1,380,684
Less current maturities of long-term debt      (111,672)          (80,320)
                                             -----------       -----------
Long-term debt, excluding current 
  maturities                                 $1,014,692        $1,300,364
                                             -----------       -----------
                                             -----------       -----------

</TABLE>

The Company has a commercial paper program which is supported by an 
irrevocable stand-by credit commitment of $600,000 with a group of 13 banks.  
The credit agreement expires in September 1997 and is subject to annual 
extension upon mutual agreement of the Company and banks.  If the Company 
elects to borrow under certain provisions of the credit agreement, the loans 
would be payable on the expiration date of this agreement.  Fees paid to the 
banks do not exceed 3/8 of 1% per year of outstanding borrowings and 1/4 of 
1% of the total commitment. The effective annual interest rates were 6.8% in 
1995 and 5.2% in 1994, including previously mentioned fees.  At December 30, 
1995, outstanding commercial paper of $250,000 has been included in long-term 
debt, as the amount of the borrowings that will be outstanding throughout the 
period covered by the commitment is not expected to fall below this level or 
will be replaced with other long-term financing.  

The Company also borrows funds under a letter of credit and revolving credit 
facility of $300,000 with a group of 11 banks.  The credit agreement expires 
in March 1998.  Certain provisions of the credit agreement limit availability 
of these funds through a specified time period.  This time period generally 
coincides with peak cash flows generated by operations of the Company.  Fees 
are currently 3/8 of 1% per year based on the total commitment.  Borrowings 
under this commitment were an average of $118,547 and a maximum of $206,000 
during 1995 and an average of $47,844 and a maximum of $200,000 during 1994.  
There was no outstanding usage under this facility at December 30, 1995 or 
December 31, 1994.

In November 1995, the Company received a $45,000 term loan from its majority 
shareholder, Spiegel Holdings, Inc.  The loan bears interest at a variable 
rate based on LIBOR plus a margin.  Of the total outstanding principal 
$25,000 will be paid in 1996 and $20,000 in 1997.  The amount to be repaid in 
1996 is included in the Company's balance sheet under "current maturities of 
debt."

                                       24

<PAGE>

The Company selectively uses interest rate swap contracts to hedge the
underlying interest risks on various term loans.  At December 30, 1995, these
interest rate swap agreements had effective and termination dates from January
1993 to December 2009.  At year-end 1995 and 1994, the notional principal
amounts of these agreements totaled $87,500 and $27,500, respectively.  At
December 30, 1995, the  fair value of these swap agreements, $7,454, was
obtained from financial institutions and represents the estimated amount the
Company would pay to terminate the agreements, taking into consideration current
interest rates and risk of the transaction.  The fair value at December 31, 1994
was not material.  The counterparties are expected to fully perform under the
terms of the agreements, thereby mitigating the risk from these transactions. 
These interest rate swaps in total had an unfavorable impact on interest expense
of $234 and $565 in 1995 and 1994, respectively.

The Company has available uncommitted money market lines aggregating $75,000. 
Usage under these lines averaged $5,832 during 1995 at various floating rates of
interest.

Additionally, the Company has letter of credit facilities to support the
purchase of inventories.  Letter of credit commitments outstanding were $109,572
and $140,173 at December 30, 1995 and December 31, 1994, respectively.

The fair value of the Company's long-term debt, based upon the discounting of
future cash flows using the Company's borrowing rate for loans of comparable
maturity, approximates the carrying value of such debt at December 30, 1995.

Aggregate maturities of long-term debt for the five years subsequent to December
30, 1995 are as follows: 1996, $111,672;  1997, $375,542;  1998, $162,900; 
1999, $140,000; and 2000 and thereafter, $336,250.


7.  EMPLOYEE BENEFIT PLANS

PROFIT SHARING AND THRIFT PLANS
Eligible salaried and hourly employees may participate in these plans. 
Employees may elect to contribute a maximum of 10% of their pre-tax base salary
and 5% of their earnings after taxes, subject to limitations imposed by the
Internal Revenue Service.

The Company's annual contributions for the profit sharing plan are determined by
applying a formula to earnings before income taxes.  Expense under this plan was
$8,314, $5,673 and $9,001 in 1995, 1994 and 1993, respectively.


The Company has thrift plans for its eligible salaried employees in which it
matches an employee's contribution dollar for dollar up to the first 3%, and 50
cents for each dollar contributed up to the next 3%. The Company also has
separate thrift plans for certain eligible hourly employees.  The Company
contributes 25 cents for each dollar of employee contributions. Expense under
these plans was $6,612, $4,917 and $4,092 in 1995, 1994 and 1993, respectively.

STOCK OPTION PLAN 
The Spiegel, Inc. Salaried Employees Incentive Stock Option Plan provides for
the issuance of options to purchase up to 1,900,000 shares of Class A non-voting
common stock to certain salaried employees. Under the plan, participants are
granted options to purchase shares of the specified stock at the fair market
value at the date of grant. The options are exercisable at the rate of 20% per
year. 

A summary of the changes in the options outstanding is as follows:

                                       25

<PAGE>

<TABLE>
<CAPTION>
                                                                        
                                             Shares       Amount      Average Price 
                                           -----------   ----------   --------------
<S>                                         <C>           <C>          <C>
Outstanding at December 31, 1992            1,139,080    $ 7,905        $   6.94
  Granted                                     206,500      4,595           22.25
  Exercised                                  (136,820)      (786)           5.75
  Canceled                                    (18,120)      (157)           8.64
                                           -----------   ----------   --------------
Outstanding at December 31, 1993            1,190,640     11,557            9.71
  Granted                                     128,800      1,288           10.00
  Exercised                                   (65,420)      (343)           5.24
  Canceled                                     (1,200)        (9)           7.85
                                           -----------   ----------    -------------
Outstanding at December 31, 1994            1,252,820     12,493            9.97
  Granted                                     274,500      2,222            8.09
  Exercised                                   (39,600)      (243)          (6.13)
  Canceled                                   (124,460)    (2,532)         (20.34)
                                           -----------   ----------    -------------
OUTSTANDING AT DECEMBER 30, 1995            1,363,260    $11,940          $ 8.76
                                           -----------   ----------    -------------
                                           -----------   ----------    -------------
EXERCISABLE AT DECEMBER 30, 1995              866,820    $ 6,975          $ 8.05
                                           -----------   ----------    -------------
                                           -----------   ----------    -------------

</TABLE>

Total stock options authorized but unissued at December 30, 1995 were 182,260. 


PENSION PLANS
The Company also has defined benefit pension plans covering substantially all
employees other than those eligible to participate in the savings and profit
sharing plans and those hourly employees eligible to participate in the thrift
plans. The unit credit actuarial cost method is used in developing the costs of
the pension plans and the pension benefit obligation.  The plan assets consist
primarily of high quality common stock and bond funds.  Due to the relocation of
certain of its catalog distribution operations, the Company recognized a
curtailment of a related hourly pension plan. The impact on net periodic pension
cost for 1993 was a charge to operating income of $12,100, which was included in
the $39,000 nonrecurring charge in the consolidated statements of earnings.



The net periodic pension cost for the years ended December 30, 1995, December
31, 1994 and December 31, 1993 is computed as follows:

<TABLE>
<CAPTION>

                                         1995           1994        1993
                                      ---------       --------    --------
<S>                                    <C>             <C>         <C>
Service cost                          $   397         $  433       $  940
Interest cost                           4,413          4,340        3,562 
Return on plan assets                  (7,049)         1,719       (7,448)
Net amortization and deferral           3,509         (5,517)      16,046 
                                      ---------       --------    --------
Net periodic pension cost             $ 1,270         $  975      $13,100 
                                      ---------       --------    --------
                                      ---------       --------    --------
</TABLE>

Weighted average assumptions used in accounting  for obligations and assets were
as follows:

<TABLE>
<CAPTION>
                                                1995         1994
                                              --------     --------
<S>                                            <C>          <C>
Discount rate                                   7.75%        9.0%
Expected long-term rate of return on assets      9.0%        9.0%

</TABLE>


                                      26


<PAGE>

The following table sets forth the plans' funded status at December 30, 1995 and
December 31, 1994:

<TABLE>
<CAPTION>

                                              1995                 1994
                                        Union    Non-Union    Union    Non-Union
                                         Plan     Plan         Plan      Plan 
                                       --------- ---------   --------- ---------
<S>                                    <C>       <C>         <C>        <C>
Accumulated and projected 
benefit obligation:
 Vested                               $ 45,362   $ 10,968   $ 41,145   $  8,519
 Non-Vested                              1,260        231      1,864        207
                                       --------- ---------   --------- ---------
Total                                   46,622     11,199     43,009      8,726
Market value of plan assets             32,525      9,993     39,079      9,504
                                       --------- ---------   --------- ---------
Over (under) funded projected 
  benefit obligation                   (14,097)    (1,206)    (3,930)       778
Unrecognized net transition liability      736      1,272      1,106      1,484
Unrecognized net loss from 
  past experience different from 
  that assumed and effects 
  of changes in assumptions             12,291      2,087        923         68
Additional liability required to
  recognize minimum liability          (13,028)    (3,359)    (2,029)        -
                                       ---------  ---------  --------- ---------
Prepaid (accrued) pension cost
     in the balance sheet             $(14,098)   $(1,206)   $(3,930)    $2,330 
                                       ---------  ---------  --------- ---------
                                       ---------  ---------  --------- ---------
</TABLE>

                                          27

<PAGE>

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to the benefits described above, the Company provides certain
medical benefits for eligible retired employees until age 65.

The following table presents the accumulated postretirement benefit obligation
at December 30, 1995 and December 31, 1994:

<TABLE>
<CAPTION>

                                                 1995        1994
                                                -------    -------
<S>                                             <C>        <C>
Retirees                                        $5,290     $1,394 
Fully eligible active plan participants          1,186      2,124 
Other active plan participants                   4,959      4,041
                                                -------    -------
Total                                           11,435      7,559
Unrecognized prior service cost                 (1,727)      (715)
Unrecognized gain (loss)                        (2,379)       154
                                                -------    -------
Accrued postretirement benefit cost 
  in the balance sheet                          $7,329     $6,998
                                                -------    -------
                                                -------    -------

</TABLE>

The net periodic postretirement benefit cost for the years ended December 30,
1995, December 31, 1994 and December 31, 1993 is computed as follows:

<TABLE>
<CAPTION>


                                             1995         1994       1993
                                           --------     --------   --------
<S>                                        <C>          <C>        <C>
Service cost                               $  629       $   616     $  352 
Interest cost                                 804           583        496
Net amortization and deferral                 141            56         - 
                                           --------     --------   --------
Net periodic postretirement benefit cost   $1,574        $1,255     $  848 
                                           --------     --------   --------
                                           --------     --------   --------

</TABLE>

For measurement purposes, an 11% and 12% annual rate of increase in the per
capita cost of covered benefits (i.e., health care cost trend rate) was assumed
for 1995 and 1994, respectively. This rate was assumed to decrease 1% per year
to 6% in 2000 and remain at that level thereafter. The health care cost trend
rate assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rate by 1 percentage point in each
year would increase the accumulated postretirement benefit obligation as of
December 30, 1995 by $864 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the year ended
December 30, 1995 by $178.

The weighted average discount rates used in determining the accumulated
postretirement benefit obligation were 7.75% and 9.0% at December 30, 1995 and
December 31, 1994, respectively.

                                        28

<PAGE>

8. INCOME TAXES

The components of income tax expense (benefit) for the years ended December 30,
1995, December 31, 1994 and December 31, 1993 are as follows:

<TABLE>
<CAPTION>

                             1995            1994         1993
                           --------       --------    --------
<S>                        <C>            <C>          <C>
Current                    $(20,117)       $11,506     $67,223
Deferred                     13,791         10,640     (28,565)
                           --------       --------    --------
                           $ (6,326)       $22,146     $38,658
                           --------       --------    --------
                           --------       --------    --------

</TABLE>

The differences between the provision for income taxes at the statutory rate and
the amounts shown in the consolidated statements of earnings for the years ended
December 30, 1995, December 31, 1994 and December 31, 1993 are as follows:

<TABLE>
<CAPTION>

                                     1995               1994              1993 
                               Amount   Percent   Amount   Percent   Amount  Percent
                              --------  -------  --------  -------  -------- -------
<S>                           <C>       <C>      <C>       <C>      <C>      <C>
Statutory rate                $(5,532)  (35.0)%  $16,536    35.0%   $30,577   35.0%
State income tax (net of 
  federal income tax benefit)  (1,027)   (6.5)     3,728     7.9      5,851    6.7 
Amortization of non-
  deductible goodwill           1,885    11.9      1,882     4.0      1,970    2.2
Changes in estimates of
   previously provided taxes   (1,652)  (10.4)       -        -        -        -
Change in statutory rate         -         -         -        -         260    0.3
                              --------  -------  --------  -------  -------- -------
Effective tax rate            $(6,326)  (40.0)%  $22,146    46.9%   $38,658   44.2% 
                              --------  -------  --------  -------  -------- -------
                              --------  -------  --------  -------  -------- -------

</TABLE>

                                          29

<PAGE>

Significant components of the Company's deferred tax assets and liabilities at
December 30, 1995 and December 31, 1994 are as follows:

<TABLE>
<CAPTION>

                                            1995         1994
                                       ----------   ----------
<S>                                       <C>          <C>
Deferred tax assets:
  Allowance for doubtful accounts         $15,324     $ 18,491
  Allowance for the gross profit               
    on estimated future returns            13,191       12,872
  Reserve for distribution facility
    and store closings                      6,541        7,251 
  Compensated absences accruals             4,523        5,053
  Reserve for self insurance                1,338          960
  Pension liability                         5,720          184
  Deferred rent obligation                    159          740
  Postretirement benefit obligation         3,038        3,003
  Capitalized overhead in inventory         4,366        9,471
  Other                                     3,355        2,028
                                         ----------  ----------
Total deferred tax assets                  57,555       60,053
                                         ----------  ----------
Deferred tax liabilities:
  Property and equipment                   49,171       47,715
  Prepaid and deferred expenses             6,250        7,035
  Gain on sale of accounts receivable      10,531        7,075
  Earned but unbilled finance charges       5,871        3,694
  Other                                       767        1,314
                                         ----------  ----------
Total deferred tax liabilities             72,590       66,833
                                         ----------  ----------
Net deferred tax liabilities              $(15,035)    $(6,780)
                                         ----------  ----------
                                         ----------  ----------

</TABLE>

9. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS 
The Company leases office facilities, distribution centers, retail store space
and data processing equipment. Lease terms generally range from 10 to 25 years
and many contain renewal options. Many of the retail store leases provide for
minimum annual rentals plus additional rentals based upon percentage of sales,
which range from 3% to 5%. Rental expense for all operating leases was $124,183
in 1995, $100,394 in 1994 and $87,177 in 1993. 

The following is a schedule by year of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of December 30, 1995:

<TABLE>
<CAPTION>
                                                 Amount
                                                ---------
              <S>                               <C>
              1996                              $121,199 
              1997                              $112,010 
              1998                              $102,652
              1999                              $ 92,966
              2000 and thereafter               $446,425

</TABLE>

                                   30

<PAGE>

LITIGATION
The Company is routinely involved in a number of legal proceedings and claims
that cover a wide range of matters. In the opinion of management, the outcome of
these matters is not expected to have any material adverse effect on the
consolidated financial position or results of operations of the Company.

10. STOCKHOLDERS' EQUITY

In December 1995, the Company announced it will discontinue payment of all cash
dividends. The Company will continue to evaluate its dividend policy on an
ongoing basis.

During the first six months of 1995, the Company purchased and retired 500,000
shares of Class A non-voting common stock at market value for a total cost of
$4,742.  Accordingly, common stock was decreased by $500 representing the par
value of the shares and additional paid-in capital was decreased by
approximately $4,242 for the difference between the purchase price and the par
value.

On January 5, 1994, the Company issued 400,000 shares of Class A non-voting
common stock. Accordingly, common stock was increased by $400 representing the
par value of the shares and additional paid-in capital was increased by
approximately $6,500 for the difference between the proceeds from the issuance
and the par value.

On October 11, 1993, the holders of a majority of Class B voting common stock of
the Company adopted an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Class A non-voting
common stock of the Company from 8,000,000 to 16,000,000 shares and Class B
voting common stock from 47,000,000 to 94,000,000 shares.

On October 11, 1993, the Board of Directors declared a 100% stock dividend to
stockholders of record on October 22, 1993, payable on November 2, 1993. The par
value of these additional shares was capitalized by a transfer from retained
earnings to common stock of $6,000 for Class A non-voting and $46,571 for Class
B voting common stock. All 1993 and prior year common share and per share
disclosures have been restated to reflect the stock dividend.

On October 22, 1993, the Board of Directors approved the retirement of the
1,027,776 shares of Class A non-voting common stock held in treasury with a
carrying value of $4,553. Accordingly, common stock was reduced by $1,028
representing the par value of the shares, and additional paid-in capital was
reduced by $3,525 for the difference between the carrying value of the treasury
shares and the par value.

On December 20, 1993, the Company issued an additional 3,600,000 shares of Class
A non-voting common stock through a public offering.  Accordingly, common stock
was increased by $3,600 for the par value of the shares and additional paid-in
capital was increased by $57,946 for the difference between the proceeds from
the issuance and the par value.

                                       31


<PAGE>

STATEMENT OF MANAGEMENT RESPONSIBILITY

We have prepared the accompanying consolidated financial statements and related
information for the years 1995, 1994 and 1993. The opinion of the Company's
independent auditors, KPMG Peat Marwick LLP, on those financial statements
follows. The primary responsibility for the integrity and objectivity of the
financial information included in this annual report rests with management. Such
information was prepared in accordance with generally accepted accounting
principles appropriate in the circumstances, based on our best estimates and
judgments and giving due consideration to materiality.

The Company maintains an internal control structure that is adequate to provide
reasonable assurance that assets are safeguarded from loss or unauthorized use,
and that produces records adequate for preparation of financial information.
There are limits inherent in all systems of internal control structures based on
the recognition that the cost of such a structure should not exceed the benefits
to be derived. In addition, the Company maintains an internal auditing
department to review the adequacy, application and compliance of the internal
control structure.

KPMG Peat Marwick LLP, independent auditors, has been engaged to audit the
financial statements and to render an opinion as to their conformity with
generally accepted accounting principles. They conducted their audit in
accordance with generally accepted auditing standards. Those standards require
that they plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. KPMG Peat
Marwick LLP is a member of the SEC Practice Section of the American Institute of
Certified Public Accountants.

The Board of Directors pursues its responsibility for these financial statements
through its audit committee, composed of directors who are not employees of
Spiegel or its subsidiaries, which meets periodically with both management and
the independent auditors to assure that each is carrying out its
responsibilities. KPMG Peat Marwick LLP and the internal audit department have
free access to the audit committee, with and without the presence of management.

                                       32

<PAGE>

REPORT OF INDEPENDENT AUDITORS

THE STOCKHOLDERS AND BOARD OF DIRECTORS OF SPIEGEL, INC.:

We have audited the accompanying consolidated balance sheets of Spiegel, Inc.
and subsidiaries as of December 30, 1995 and December 31, 1994, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Spiegel, Inc. and
subsidiaries as of December 30, 1995 and December 31, 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 30, 1995 in conformity with generally accepted accounting
principles. 




/s/ KPMG PEAT MARWICK LLP

Chicago, Illinois 
February 9, 1996

                                      33

<PAGE>


SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
($000s omitted, except per share amounts)

<TABLE>
<CAPTION>


1995                         First           Second          Third           Fourth          Year End
------------------       ------------     ------------    ------------     ------------    -----------
<S>                      <C>              <C>             <C>              <C>             <C>      
Net sales and           
  other revenues         $679,627        $699,280         $685,923        $1,119,354      $3,184,184
Operating income 
  (loss)                    9,661          (2,873)         (13,773)           94,355          87,370
Net earnings (loss)      $ (9,415)       $(14,860)        $(22,618)       $   37,412      $   (9,481)
Net earnings (loss) 
  per common share       $   (.09)       $   (.14)        $   (.21)       $      .35      $     (.09)
Weighted average 
  common shares
  outstanding         108,152,162     107,716,627      107,736,680       107,746,498     107,837,992

MARKET PRICE DATA
    High                 $ 10 1/2        $ 13 7/8         $ 13 5/8         $  11           $  13 7/8
    Low                  $  8 7/8        $  8 3/4         $ 10             $   6 7/8       $   6 7/8

1994
------------------
Net sales and           
  other revenues        $ 622,134        $ 675,077       $ 649,364        $1,069,410      $3,015,985
Operating income           29,350           31,365          27,013            44,898         132,626
Net earnings            $   6,544        $   6,504       $   2,798         $   9,254      $   25,100
Net earnings per 
  common share          $     .06        $     .06       $     .03         $     .09      $      .23
Weighted average 
  common shares
  outstanding         108,152,215      108,191,064     108,197,629       108,206,898     108,187,069

MARKET PRICE DATA
    High               $   26 3/4       $   24 3/8      $   19 3/4         $  18 1/4      $   26 3/4
    Low                $   17 3/4       $       17      $   13 1/2         $   8 3/4      $    8 3/4
   

</TABLE>

                                          34

<PAGE>


                                    PART III

ITEM 11.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

The following persons are the directors of the Company.

<TABLE>
<CAPTION>
                                                                                     Year
                                                                               Elected as
Name                            Age  Offices with Registrant or Other (4)        Director
----------------------          ---  ----------------------------------------------------
<S>                             <C>  <C>                                          <C>
Dr. Michael Otto (1)            52   Chairman of the Board of Directors              1982
                                     and Chairman of the Board of Directors of 
                                     Otto Versand (GmbH & Co).

John J. Shea (1)(3)             57   Vice Chairman of the Board of Directors,        1983
                                     President and Chief Executive Officer

Kenneth A. Bochenski            53   Senior Vice President - Operations and          1987
                                     Information Services

Thomas Bohlmann                 50   Board of Directors and Director - Planning      1989
                                     and Control of Otto Versand (GmbH & Co)
                                     
Dr. Michael E. Crusemann (2)(3) 50   Board of Directors and Chief Financial          1994
                                     Officer of Otto Versand Group (1995);
                                     Deputy Director of Finance of Otto Versand
                                     (GmbH & Co) (1985)

Harold S. Dahlstrand            51   Senior Vice President - Human Resources         1994

Hans-Christoph Fischer          57   Board of Directors and Director -               1982
                                     Merchandise of Otto Versand (GmbH & Co) 

Hans-Jorg Hammer                56   Board of Directors and Director -               1991
                                     Personnel of Otto Versand (GmbH & Co)(1991);
                                     Deputy Director - Personnel of Otto
                                     Versand (GmbH & Co)(1988)

Horst R. Hansen (2)             61   Retired.  Prior to March 1994 was a member      1982
                                     of the Board of Directors and Director - 
                                     Finance and Chief Financial Officer
                                     of Otto Versand Group

Karl-August Hopmann (2)         60   Retired.  Prior to March 1991 was a member      1982
                                     of the Board of Directors and Director -
                                     Personnel of Otto Versand (GmbH & Co)(1988)

David C. Moon                   53   Executive Vice President                        1991

Dr. Peter Muller (1)            54   Board of Directors and Director -               1985
                                     Advertising and Marketing of Otto Versand 
                                     (GmbH & Co)


                                           35

<PAGE>

Dr. Peer Witten                 50   Board of Directors and Director -               1991
                                     Operations of Otto Versand (GmbH & Co)     


</TABLE>

(1) Member of Board Committee (Executive Committee)
(2) Member of Audit Committee
(3) Member of Finance Committee
(4) The business experience during the last five years of directors who are
    executive officers of the Company is detailed along with the listing of 
    executive officers that follows.

The terms of all the above-named directors expire on the date of the next 
annual meeting of the stockholders which is to be held in April, 1996.

Dr. Michael Otto was a member of the Board of Directors and Director -
Merchandise of Otto Versand for ten years prior to March 1, 1981.

There is no family relationship between any of the directors.

EXECUTIVE OFFICERS

The following persons are the executive officers of the Company:

<TABLE>
<CAPTION>

                                             Positions and Offices Held
                                     (all positions and offices are of the Company
Name                            Age              unless otherwise indicated)    
----------------------          ---  ---------------------------------------------------
<S>                             <C>  <C>
John J. Shea                    57   Vice Chairman (1989), President and Chief Executive
                                     Officer (1985) and Director (1983)

James W. Sievers                53   Senior Vice President - Finance (1995) and
                                     Chief Financial Officer (1994); Vice
                                     President - Finance (1990); Senior Vice
                                     President - Finance and Operations and
                                     Director of Eddie Bauer (1988)

Kenneth A. Bochenski (1)        53   Senior Vice President - Operations and
                                     Information Services (1987) and Director (1987)

Harold S. Dahlstrand            51   Senior Vice President - Human Resources (1993);
                                     Vice President - Human Resources (1985); and  
                                     Director (1994)

David C. Moon (1)               53   Executive Vice President (1994); Senior Vice
                                     President- Merchandise (1990); Vice President -
                                     Merchandise (1987) and Director (1991)

James J. Broderick              42   Vice President - Merchandising (1993);
                                     Divisional Vice President - Merchandise
                                     (1992); General Merchandise Manager
                                     (1991); Merchandise Manager (1988)

Robert E. Conradi               52   Vice President - Merchandising (1987)


                                          36

<PAGE>

  
Davia L. Kimmey                 42   Vice President - Advertising (1992); Vice President
                                     Advertising and Marketing of Eddie Bauer (1990);
                                     Divisional Vice President
                                     - Advertising of Eddie Bauer (1988)

Stanley D. Leibowitz            44   Vice President - Corporate Planning (1988)

Alois J. Lohn                   61   Vice President - Manufacturing (1990); Vice
                                     President - Manufacturing of Jones New York (1989)

Michael R. Moran                49   Vice President, Secretary & General Counsel (1988)

Karl A. Steigerwald             49   Vice President - Marketing (1992); Vice President -
                                     Marketing and Information Services (1991)

John R. Steele                  43   Divisional Vice President and Treasurer
                                     (1995); Treasurer (1993); Corporate
                                     Finance Director of Deutsche Bank (1992);
                                     Vice President of Deutsche Bank (1988)

Richard T. Fersch               46   President and Chief Operating Office of
                                     Eddie Bauer (1992); Executive Vice
                                     President - Merchandising and Marketing of
                                     Eddie Bauer (1992); Senior Vice President
                                     - Store of Eddie Bauer (1989)

George D. Ittner                52   President and Chief Operating Officer -
                                     Newport News (1992); Executive Vice
                                     President and General Manager - Avon
                                     Fashions (1985)


</TABLE>


(1)  In March 1996, Kenneth A. Bochenski and David C. Moon announced they 
would retire from the Company.  Each will resign from the Board of Directors 
in April 1996.
   
The terms of all the above-named officers expire on the date of the next 
annual meeting of the Board of Directors which is to be held in April, 1996.

There is no family relationship between any of the officers.


                                          37

<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth all compensation paid or accrued by the Company
for the years ended December 30, 1995, December 31, 1994 and December 31, 1993
to or on behalf of each of the five most highly compensated key policy-making
executive officers of the Company.

<TABLE>
<CAPTION>

                                                            Stock
Name and                             Annual Compensation    Options         All Other
Principal                              Salary    Bonus      Granted      Compensation(1)
Position                    Year        ($)       ($)         (#)            ($)
------------------------   ------     ------    -------    --------     ---------------
<S>                        <C>        <C>       <C>        <C>          <C>
John J. Shea                1995     $600,000  $      -     100,000 (2)    $157,732
      Vice Chairman         1994      600,000   236,250          --         145,667
      President, Chief      1993      550,000   605,500     125,000         143,218
      Executive Officer
      and Director

Richard T. Fersch           1995      415,000   466,875      50,000          68,789
      President of          1994      400,000   150,000      10,000          79,741
      Eddie Bauer           1993      304,225   274,560       5,000          59,886

David C. Moon               1995      270,000         -      10,000          72,387
      Executive Vice        1994      240,000    70,900       5,000          55,862
      President -           1993      220,000   183,000       5,000          64,923
      Merchandise and
      Director

George D. Ittner            1995      330,000         -       5,000          24,612
      President of          1994      299,156    99,750       5,000           3,696
      Newport News, Inc.    1993 (3)  100,000         -           -               -

Alois J. Lohn               1995      285,000         -           -          82,078
      Vice President,       1994      285,000    85,500       3,000          66,291
      Manufacturing         1993      275,000   168,500       3,000          80,682


</TABLE>

(1) The following tables summarize all other compensation for the years ended 
    December 30, 1995, December 31, 1994 and December 31, 1993:
(2) The options granted to John J. Shea in 1995 represent a repricing of 100,000
    of the options granted to him in 1993. 
(3) Newport News, Inc. was acquired by the Company in August, 1993. 
    Compensation represented for George D. Ittner is from this time on in 1993.

                                        38

<PAGE>
<TABLE>
<CAPTION>

                                               Employer
                                        Car     Profit    Life 
                         Supplemental  Allow-  Sharing  Insurance Employer
                          Retirement   ance/   Contrib- Premiums   401(K)
         Name              Benefits    Other    ution     Paid    Matching   Total
     -------------------  ---------- -------   -------  -------   -------- --------
     <S>                  <C>        <C>       <C>      <C>       <C>      <C>
1995 John J. Shea         $73,401    $38,168   $6,000   $33,413   $6,750   $157,732
     Richard T. Fersch     14,515     33,514   14,010        -     6,750     68,789
     David C. Moon         14,680     25,300    6,000    19,657    6,750     72,387
     George D. Ittner         -       17,998       -      1,994    4,620     24,612
     Alois J. Lohn         22,020     25,602    6,000    21,706    6,750     82,078


1994 John J. Shea          $72,154   $36,368   $6,000   $24,395   $6,750   $145,667
     Richard T. Fersch      33,699    33,292    6,000      --      6,750     79,741
     David C. Moon           6,808    19,311    6,000    16,993    6,750     55,862
     George D. Ittner           -         -        -         -     3,696      3,696
     Alois J. Lohn          17,699    19,428    6,000    16,414    6,750     66,291


1993 John J. Shea          $43,142   $33,225   $12,928  $47,177   $6,746   $143,218
     Richard T. Fersch      24,810    17,294    11,036        -    6,746     59,886
     David C. Moon           5,685    17,411    13,018   22,063    6,746     64,923
     George D. Ittner           -         -         -        -        -          -
     Alois J. Lohn          13,317    17,644    12,928   30,047    6,746     80,682

</TABLE>

OPTION GRANTS TABLE

The following table sets forth grants of stock options to the named executive
officers during the year ended December 30, 1995 and the potential realizable
value of the grants assuming that the market price of the underlying stock
appreciates in value from the date of grant to the end of the option term at the
stipulated annual rates of 5% and 10%:
                                  
<TABLE>
<CAPTION>

                    Number                                  
                      of                                          Potential Realizable
                  Securities  Percent of                            Value at Assumed 
                    Under-   Total Options                        Annual Rates of Stock
                     lying     Granted to                           Price Appreciation 
                    Options    Employees   Exercise   Expiration       for Option      
Name                Granted    in 1995       Price      Date        5% ($)    10% ($)  
------------------ ---------  -----------  --------- ----------- ----------- -----------
<S>                <C>         <C>          <C>       <C>         <C>         <C>
John J. Shea        100,000        36%      $ 10.00    12/30/04    $628,895   $1,593,742

Richard T. Fersch    50,000        18%         7.00    12/29/05     220,113      557,810

David C. Moon        10,000         4%         7.00    12/29/05      44,023      111,562

George D. Ittner      5,000         2%         7.00    12/29/05      22,011       55,781

Alois J. Lohn           -           -            -         -          -             -

</TABLE>

The stock options granted become exercisable at the rate of 20% per year from
the date of the grant.

                                       39

<PAGE>

AGGREGATED OPTION EXERCISES IN 1995 AND DECEMBER 30, 1995 OPTION VALUES

The following table sets forth shares acquired on exercise and stock option
values at December 30, 1995:

<TABLE>
<CAPTION>

                                             Number of Securities      Value of Unexercised
                                             Underlying Unexercised    In-the-Money Options
                    Shares                       Options at                 at
                    Acquired                 December 30, 1995         December 30, 1995       
                      On          Value      Exercise-   Unexercise-   Exercise-    Unexercise-
    Name            Exercise     Realized    able        able          able         able
------------------  --------     --------    ----------  -----------   ----------   -----------
<S>                 <C>          <C>         <C>         <C>           <C>          <C>
John J. Shea        20,000       $265,000       239,000      119,000     $117,460      $  3,500

Richard T. Fersch        -              -        21,600       63,800        2,700           525

David C. Moon            -              -        48,600       21,400       45,445           875
  
George D. Ittner         -              -         1,000        9,000            -             -
    
Alois J. Lohn            -              -        10,600        5,400        3,350           525

</TABLE>

COMPENSATION OF DIRECTORS
 
The Company pays an annual fee of $10,000 to its independent directors and
reimburses any reasonable out-of-pocket expenses incurred by all directors in
attending meetings.


REPORT OF REPRICING OF OPTIONS

The following table sets forth a transaction which in effect reprices certain
options granted.  This transaction was approved by the Board of Directors and
the Stock Option Committee.

<TABLE>
<CAPTION>

                                                                                  Length of
                          Number of        Market Price   Exercise                Original
                          Securities       of Stock at    Price at                Option Term
                          Underlying       Time of        Time of                 Remaining at
                          Options          Repricing or   Repricing or  New       Date of 
                          Repriced or      Amendment      Amendment     Exercise  Repricing or
Name              Date    Amended (#)          $             $          Price ($) Amendment    
--------------  -------   --------------   ------------   ------------  --------- -------------
<S>             <C>       <C>              <C>            <C>           <C>       <C>
John J. Shea    5/10/95   100,000           $10.00          $22.75        $10.00     8 years


</TABLE>


                                           40

<PAGE>

EMPLOYMENT AGREEMENT

The Company has an employment agreement with John J. Shea, President and Chief
Executive Officer of the Company, the term of which extends through December 31,
1998.  The current annual base salary under this agreement is $600,000.  The
agreement entitles Mr. Shea to receive an annual bonus based on a sliding-scale
percentage of the Company's consolidated net income before taxes.  Mr. Shea is
also eligible to receive certain other benefits.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board Committee, which determines executive officer compensation, consists
of Dr. Michael Otto, Dr. Peter Muller and John J. Shea.  Mr. Shea also serves as
President and Chief Executive Officer of the Company.

EMPLOYEE BENEFITS

        STOCK OPTION PLAN.  

        The Spiegel, Inc. Semi-Monthly Salaried Employees Incentive Stock 
        Option Plan is administered by a Stock Option Committee consisting 
        of three members of the Company's Board of Directors who are not 
        salaried employees of the Company or its participating subsidiaries 
        and who are appointed to the Committee from time to time.  Certain 
        salaried employees of Spiegel and its subsidiaries are eligible to 
        participate in the plan.  Options are granted to those eligible 
        employees as the Stock Option Committee shall select from time to 
        time.  The Stock Option Committee also has authority to determine 
        the number of shares and terms consistent with the Plan with 
        respect to each option. Options granted under the plan relate to 
        the Class A Non-Voting Common Stock of the Company. The maximum 
        number of shares which may be issued under options granted is 
        1,900,000 shares.  The participants' options become exercisable at 
        the rate of 20% per year.  The options expire ten years after the 
        date of grant of options. The option price upon exercise of the 
        option is the fair market value of the shares on the date of grant 
        of the option.  Options granted under the plan are not transferable 
        or assignable other than by will or by the laws of descent and 
        distribution.

        The average per share price of stock options granted during the 
        year was $8.09. Net cash realized with respect to the exercise of 
        options during the year was approximately $243,000.
        
        SPIEGEL GROUP PROFIT SHARING AND 401(K) SAVINGS PLAN

        The Company maintains a consolidated Profit Sharing and 401(K) 
        Savings Plan for salaried and hourly employees of Spiegel, Eddie 
        Bauer, FCNB and Distribution Fulfillment Services ("DFS").  
        Participation commences on the beginning of a quarter following one 
        year of continuous service.  The Company and participating 
        subsidiaries contribute annually to the plan 8% of the first $100 
        million of Spiegel consolidated earnings before income taxes, plus 
        6.75% of the second $100 million of Spiegel consolidated earnings 
        before income taxes, plus 4.5% of Spiegel consolidated earnings 
        before income taxes in excess of $200 million plus any other 
        amounts determined by the Company's Board of Directors.  A minimum 
        total contribution of 1-1/2% of eligible considered compensation 
        will be made, 
        

                                           41

<PAGE>

        but in no event will the total contribution exceed the maximum 
        amount deductive for Federal income tax purposes.  Company 
        contributions and forfeitures are allocated among eligible 
        participants in proportion to considered compensation. A 
        participant can make nondeductible voluntary contributions to the 
        plan of up to 5% of their considered compensation, subject to 
        special limitations imposed by the Internal Revenue Code thereon.
        
        Employees may also contribute up to 10% of their base compensation 
        to the 401(K) Plan through payroll deductions.  Employee 
        contributions are made on a pretax basis under Section 401(k) of 
        the Internal Revenue Code.  The Company matches salaried employee 
        contributions dollar for dollar up to the first 3% of base 
        compensation and 50 cents for each dollar contributed up to the 
        next 3%.  The Company matches hourly employee contributions 25 
        cents for each dollar contributed up to 6% of base compensation.  
        The Company's matching contributions, however, may not exceed the 
        amount deductible under the Internal Revenue Code.
        
        All contributions and investments are held in a trust for the 
        benefit of plan participants.  All employees who participate in the 
        plan after one year of service are 100% vested in their 
        contributions and earnings thereon but become vested in the 
        Company's matching contribution and earnings thereon at a rate 
        based on years of service, with full vesting after a maximum of 
        seven years. Participants who suffer a financial hardship as 
        defined by the Internal Revenue Code may withdraw amounts from the 
        plan while still employed.  Repayment is made through payroll 
        deductions.  In addition, participants may annually receive a 
        distribution of their after-tax contributions.  All participants 
        receive the full value of their accounts under the plan upon 
        retirement or permanent disability and the vested portion of their 
        accounts on other termination of employment.  The full value of a 
        deceased participant's account is distributable to his 
        beneficiaries.  Distributions are made in a lump sum.
        
        SPIEGEL, INC., SUPPLEMENTAL RETIREMENT BENEFIT PLAN.
        
        The Company maintains a funded supplemental retirement plan for the 
        benefit of its employees and those of its participating 
        subsidiaries covered by the profit sharing and thrift plans 
        described above (the "profit sharing and thrift plans") whose 
        benefits under the profit sharing and thrift plans are reduced by 
        application of Sections 415, 401(k) and 401(a)(17) of the Internal 
        Revenue Code. If a participant's annual additions under the profit 
        sharing and thrift plans are reduced by reason of special 
        limitations of the Internal Revenue Code, the Company will make an 
        annual contribution to the trust in the amount of the reduction.  
        Supplemental benefits under the supplemental retirement plan are 
        payable in cash at the same time and in the same manner as the 
        participant's employer account under the profit sharing and thrift 
        plans except no payments are made prior to death or reaching 
        retirement age.

                                     42

<PAGE>

        SPLIT DOLLAR LIFE INSURANCE PROGRAM.  
        
        The Company maintains a split dollar life insurance program 
        covering certain executives of the Company.  A covered employee may 
        apply for an individual life insurance policy on his life in a face 
        amount up to three times his base salary. The employee pays a 
        portion of the annual premium equal to the after tax cost of an 
        equivalent amount of term life insurance.  The balance of the 
        premium due (if any) is paid by the Company.  The Company owns a 
        part of the cash value equal to its payments and is beneficiary for 
        that amount.  The employee names his own beneficiary and 
        collaterally assigns the policy to the Company to the extent of the 
        Company's payments.  Cash value and dividends accumulate tax-free 
        and all amounts in excess of the Company's payments belong to the 
        employee. The Company premium payments will last only seven years.  
        Future employee contributions will reduce the amounts advanced by 
        the Company's premium payments.  The Company may withdraw cash at 
        the earlier of the employee's retirement, termination of employment 
        or the time at which the policy dividends will pay the premium 
        after the withdrawal.  At termination of employment or retirement, 
        the Company may withdraw its cash value and the employee may either 
        surrender the policy for his portion of the cash value, receive an 
        income from the insurance company in lieu of cash, or continue the 
        policy in force.  On the death of the employee, the Company 
        receives any amounts due it with the balance of the proceeds 
        payable as directed by the employee.
        
        EXECUTIVE BONUS AND INCENTIVE PLANS.  
        
        The Company maintains various bonus plans for certain of its 
        executives, designed to reward performance.  The Company's annual 
        payment of bonuses is based upon the attainment of pre-determined 
        operating and financial objectives. For 1995, approximately 
        $6,340,000 was paid  under these bonus plans.
        
        NEWPORT NEWS, INC. RETIREMENT SAVINGS PLAN
        
        Newport News has a retirement savings plan covering its associates. 
        Associates become eligible as of the beginning of the calendar 
        quarter following completion of one year of service.  Associates 
        may elect to contribute up to 10% of their compensation to the plan 
        on a pre-tax basis under Section 401(k) of the Internal Revenue 
        Code.  The associate may also elect to make nondeductible after-tax 
        contributions to the plan of up to 5% of their compensation.  The 
        company matches contributions at a rate of 50% of the first 4% of 
        compensation contributed.  The company matching contributions, 
        however, may not exceed the amount deductible under the Internal 
        Revenue Code.
        
        Contributions are held in trust for the benefit of the plan 
        participants.  A participant receives the full amount in this 
        account under the plan (including investment earnings) on 
        termination of employment by reason of retirement (as defined in 
        the plan document), or disability.  Upon death, the full value of 
        the participant's account is distributable to their beneficiary.  
        On any other termination of employment, a participant is 100% 
        vested at all times in the portion of his account attributable to 
        pre-tax contributions, and is vested in the company's matching 
        contributions and earnings thereon, at a rate based on years of 
        service, 

                                      43

<PAGE>

        with full vesting after a maximum of five years. Distributions are 
        made on a lump sum basis.  Participants are permitted to borrow 
        from their account, but may only have one loan outstanding at a 
        time. Participants suffering certain financial hardships may 
        request an inservice withdrawal of prior contributions.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

a.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Spiegel Holdings, Inc. (SHI) holds 99.8% of the Company's Class B Voting Common
Stock.  The following table sets forth certain information with respect to the
number of shares of Class B Voting Common Stock owned by SHI, which is the only
stockholder beneficially owning more than 5% of the Class B Voting Common Stock.
SHI is a holding company whose principal asset is stock of the Company.  The
total number of holders of the Company's Class B voting Common Stock as of
March 22, 1996, was four.

<TABLE>
<CAPTION>
                                                       Percentage of
                                                       Outstanding
                              Number of    Title of    Class B Voting
Name and Address              Shares(1)     Class      Common Stock 
-------------------------    -----------   ---------   ---------------
<S>                          <C>            <C>        <C>
Spiegel Holdings, Inc.(2)     92,991,374    Class B      99.8%
The Corporation                             Voting
  Trust Center                              Common
1209 Orange Street                          Stock
Wilmington, DE 19801

</TABLE>

(1)     The shares are owned of record and beneficially, with sole
        investment and voting power.  However, see note (2) below.

(2)     In excess of 50% of the common stock of SHI is beneficially owned
        by Dr. Michael Otto who controls the manner in which SHI votes
        its Class B Voting Common Stock of the Company in all matters,
        including the election of directors.  Under rules and regulations
        promulgated by the Securities and Exchange Commission, Dr. Otto
        may be deemed to beneficially own all the shares of the Company
        owned by SHI.  Dr. Otto is a director of the Company.  No
        officers or other directors of the Company are stockholders of
        record or beneficial stockholders thereof.

b.  SECURITY OWNERSHIP OF MANAGEMENT

As of March 22, 1996, certain members of the Company's Board of Directors, 
and the directors and officers of the Company as a group, owned shares of the 
Company's Class A Non-Voting Common Stock as indicated in the following table:

As shown in Column II, in the case of Company officers, portions of the 
shares indicated as beneficially owned are actually shares attributable to 
unexercised and unexpired options for Class A Non-Voting Common Stock granted 
by the Company to such officers, which are exercisable as of, or first become 
exercisable within 60 days after, March 22, 1996.

                                         44

<PAGE>

<TABLE>
<CAPTION>

                                     Amount and                 
               Name of               Nature of          
 Title        Beneficial             Beneficial         Acquirable        Percent 
of Class        Owner                Ownership (1)    Within 60 Days      of Class 
--------   --------------------      -------------    --------------     ------------                                  
                                          (I)            (II)              (III)
<S>        <C>                       <C>              <C>                 <C>

Class A    Richard T. Fersch            25,200           21,600            *

Class A    Karl-August Hopmann          15,000               0             *
      
Class A    George D. Ittner              2,400            1,000            *

Class A    Alois J. Lohn               284,600           10,600           1.9%

Class A    David C. Moon                54,100           48,600            *

Class A    Dr. Peter Muller             10,000               0             *

Class A    John J. Shea                351,000          239,000           2.4%

Class A    All directors and         1,126,325          605,400           7.7%
           officers as a group
           (24 persons)              

</TABLE>


(1)   Includes shares which may be acquired within 60 days under the Company's
      Stock Option Plan.
 
*     Less than 1%.

ITEM 13.  CERTAIN TRANSACTIONS

Since its acquisition of the Company in 1982, and following the transfer of its
interest therein to its partners and designees in April 1984, Otto Versand and
the Company have entered into certain agreements seeking to benefit both parties
by providing for the sharing of expertise.  The following is a summary of such
agreements and certain other transactions.

The Company utilizes the services of Otto Versand International (GmbH) as a 
buying agent for the Company in Hong Kong, Taiwan, Korea, India, Italy, 
Indonesia, Singapore, Thailand and Turkey.  Otto Versand International (GmbH) 
is a wholly-owned subsidiary of Otto Versand.  Buying agents locate 
suppliers, inspect goods to maintain quality control, arrange for appropriate 
documentation and, in general, expedite the process of procuring merchandise 
in these areas. Under the terms of its arrangements, the Company paid 
$3,720,000 in 1995, $4,445,000 in 1994 and $4,126,000 in 1993.  The 
arrangements are indefinite in term but may generally be canceled by either 
party upon one year's written notice.

The Company has an agreement with Together, Ltd., a United Kingdom company, 
which gives the Company the exclusive right to market "Together!" merchandise 
by catalog and in retail stores.  Otto Versand owns a 50% interest in 
Together, Ltd.  Commission expenses incurred on this account were $5,755,000, 
$8,012,000 and $7,417,000 in 1995, 1994, and 1993, respectively.  These 
expenses include certain production services, the cost of which would 
normally be borne by the Company, 

                                      45

<PAGE>

including design of the product, color separation, catalog copy and layout, 
identification of suggested manufacturing sources and test marketing 
information.

In September 1993, the Company announced an agreement with Otto-Sumisho, Inc. 
(a joint venture company of Otto Versand and Sumitomo Corporation) to form a 
joint venture and enter into license agreements to sell Eddie Bauer products 
through retail stores and catalogs in Japan.  The joint venture and license 
agreements were executed in 1993.  Three retail stores were opened in the 
Fall of 1994, and another four retail stores were opened during 1995.   The 
Company believes that the terms of the arrangement are no less favorable to 
Eddie Bauer than would be the case in an arrangement with an unrelated third 
party.  To date, Eddie Bauer has contributed $8,900,000 to the project and in 
1994, received a $2,500,000 licensing fee for the use of its name.  Eddie 
Bauer received $1,717,000 and $246,000 in royalty income on retail sales 
during 1995 and 1994, respectively. Eddie Bauer recorded approximately 
$673,000 and $780,000 for its share of the equity losses of the joint venture 
during 1995 and 1994, respectively.

During 1995, Eddie Bauer entered into an agreement with Handelsgesellschaft 
Heinrich Heine GmbH and Sport-Scheck Gmbh (both subsidiaries of Otto Versand) 
to form a joint venture to sell Eddie Bauer products through retail stores 
and catalogs in Germany.  The joint venture and license agreements were 
executed on June 6, 1995.  The Company believes that the terms of the 
arrangement are no less favorable to Eddie Bauer than would be the case in an 
arrangement with an unrelated third party.  Eddie Bauer has contributed 
$2,330,000 to the project and has received $1,000,000 in licensing fees  for 
the use of its name.  Eddie Bauer recorded approximately $98,000 for its 
share of equity losses of the joint venture during 1995.  Retail stores are 
scheduled to open in late 1996.

In addition in 1994 and 1995 Eddie Bauer participated in a limited test 
marketing program with Sport Scheck GmbH (a subsidiary of Otto Versand) for 
the sale of Eddie Bauer products in Germany and Switzerland through 
Sport-Scheck catalogs.  This arrangement has ceased operating with the advent 
of the joint venture discussed above.  The Company believes that the terms of 
the arrangement were no less favorable to Eddie Bauer than would have been 
the case in an arrangement with an unrelated third party.  During 1995 and 
1994, respectively, Eddie Bauer received approximately $296,000 and $211,000 
in royalty income from Sport-Scheck.

In 1993, Eddie Bauer entered into an agreement with Eddie Bauer 
International, Ltd., (a subsidiary of Otto Versand) whereby the latter acts 
as buying agent in Asia and contacts suppliers, inspects goods and handles 
shipping documentation for Eddie Bauer.  The Company believes that the terms 
of the arrangement are no less favorable to Eddie Bauer than would be the 
case in an arrangement with an unrelated third party.  The Company paid 
$13,707,000 and $11,056,000 for these services in 1995 and 1994, respectively.

In March 1994, Newport News issued 113 shares of non-voting preferred stock 
to ten directors and ten other executive officers of the Company and nine 
executive officers and directors of Newport News and Otto Versand for $40,000 
per share. Each participant was eligible to purchase up to four shares.  
These individuals and the number of shares each owns, indicated in 
parentheses following each name, include:  Dr. Michael Otto (4); Thomas 
Bohlmann (3); Hans-Christoph Fischer (4); Hans-Jorg Hammer (4); Dr. Peter 
Muller (4); Peer Witten(4); John J. Shea (4); Kenneth A. Bochenski (4); 
Harold S. Dahlstrand (4); David C. Moon (4); James J. Broderick (4); Robert 
E. Conradi (4); Davia L. Kimmey (4); Stanley D. Leibowitz (4); Alois J. Lohn 
(4); Michael R. Moran (4); Georgia L. Shonk-Simmons (4); James W. Sievers 
(4); Karl

                                    46

<PAGE>

A. Steigerwald (4); George D. Ittner (4); James W. Brewster (4); Marianne A. 
Taylor (4); Geralyn M. Madonna (2); Gerhard Hocht (4); Siegfried Kockmann 
(4); Gert Rietz (4); Martin Zaepfel (4) and Dr. Michael Crusemann (4).  In 
December, 1995, an additional seven shares were offered to four  executive 
officers from Newport News and Eddie Bauer at $43,000 per share. These 
individuals and the number of shares each owns, indicated in parenthesis 
following each name, include:  Martin Smith (1); David Knoll (1); Charley 
Krieg (1); and Richard Fersch (4).  The redemption price of the preferred 
stock prior to December 31, 1997 is $40,000 per share.  Subsequent to 
December 31, 1997, the redemption price is fair market value.  All shares of 
Newport News non-voting preferred stock must be redeemed by December 31, 
1999, but may be redeemed as early as December 31, 1997 at the option of the 
holder.

The Company is included in the consolidated federal income tax return of SHI. 
Pursuant to a tax reimbursement agreement with SHI, the Company records 
provisions for income tax expense as if it were a separate taxpayer.

                                    47

<PAGE>

 
                                   PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

                                                                       
                                                                       Page

A.            1.  FINANCIAL STATEMENTS
                  
                  Consolidated Balance Sheets                          16
                  Consolidated Statements of Earnings                  17
                  Consolidated Statements of Stockholders' Equity      18
                  Consolidated Statements of Cash Flows                19
                  Notes to Consolidated Financial Statements           20-
                                                                       31
                  Independent Auditors' Report                         33
                  Selected Quarterly Financial Data                    34


              2.  FINANCIAL STATEMENT SCHEDULE
                  
                  Independent Auditors' Report on Schedule             50
                  Schedule II--Valuation and Qualifying Accounts       51
                  

                  Schedules not listed above are omitted because of 
                  absence of conditions under which they are required 
                  or because the required information is included in 
                  the financial statements submitted.


                                      48

<PAGE>

              3.  EXHIBITS

              Exhibit
              Number    Description of Exhibit


               3(a)     Restated Certificate of Incorporation of the 
                        Registrant (i)

               3(b)     By-Laws of the Registrant (i)

               4        Revised Specimen Stock Certificate (ii)

               10(a)    Spiegel, Inc., Semi-Monthly Salaried Employees
                        Incentive Stock Option Plan (File No. 33-15936) and
                        post-effective Amendment No. 1 thereto, and the
                        Company's registration statements on Form S-8 and post-
                        effective amendments thereto (File No. 33-19663, 33-
                        32385, 33-38478, 33-44780, 33-56200, 33-51755 and 33-
                        65469) (iii)

               10(b)    Spiegel, Inc., Supplemental Retirement Benefit Plan (iv)

               21       List of subsidiaries of the Registrant

               23       Consent of Independent Auditors

               24       Powers of Attorney (iv)

               27       Financial Data Schedule

(i)             Filed as an Exhibit to or part of the Company's Registration
                Statement on  Form S-3 (File No. 33-50739) and hereby
                incorporated by reference herein.

(ii)            Filed as an Exhibit to the 1988 10-K.

(iii)           Filed as an Exhibit to or part of the Company's Registration
                Statement on Form S-8 (File No. 33-19663, 33-32385, 33-38478,
                33-44780, 33-56200 and 33-51755) and hereby incorporated by
                reference herein.

(iv)            Filed as an Exhibit to or part of the Company's Registration
                Statements on Form S-1 (File No. 33-15936) and hereby
                incorporated by reference herein.

B.              REPORTS ON FORM 8-K

                None.


                                            49

<PAGE>

                        INDEPENDENT AUDITORS' REPORT ON SCHEDULE


The Board of Directors and Stockholders
Spiegel, Inc.:


Under date of February 9, 1996, we reported on the consolidated balance sheets
of Spiegel, Inc., and subsidiaries as of December 30, 1995 and December 31,
1994, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for each of the years in the three-year period ended December 30,
1995, which are included elsewhere herein. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule as listed in Part IV, Item 14 (A) (2).
This financial statement schedule is the responsibility of the Company's
management.  Our responsibility is to express an opinion on this financial
statement schedule based on our audits.

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


                                                /S/ KPMG PEAT MARWICK LLP


Chicago, Illinois
February 9, 1996

                                        50

<PAGE>

                                                             SCHEDULE II


                         SPIEGEL, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                               FOR THE YEARS ENDED
                                 ($000s omitted)

<TABLE>
<CAPTION>

                                      December 30,  December 31,  December31,
                                          1995         1994          1993
                                       ----------   -----------   ----------
<S>                                    <C>           <C>          <C>
ACCOUNTS RECEIVABLE VALUATION ACCOUNTS


ALLOWANCE FOR DOUBTFUL ACCOUNTS

Balance at beginning of year             $49,954      $46,855       $37,231   
  Charged to earnings                     91,612       79,183        69,160  
  Reduction for receivables sold         (33,600)      (6,300)       (1,609)
  Other (1)                                  -             -            695
  Accounts written off, net of                      
    recoveries                           (67,134)     (69,784)      (58,622)
                                       ----------   -----------   ----------
  Balance at end of year                 $40,832      $49,954       $46,855
                                       ----------   -----------   ----------
                                       ----------   -----------   ----------
ALLOWANCE FOR RETURNS

Balance at beginning of year             $27,762      $28,238       $23,960
  Charged to earnings                    274,331      266,700       259,111
  Amounts written off                   (276,390)    (267,176)     (254,833)
  Other (2)                               12,066           -             -
                                       -----------  ------------  -----------
  Balance at end of year                 $37,769      $27,762       $28,238
                                       ----------   -----------   ----------
                                       ----------   -----------   ----------
</TABLE>

(1)     Other represents the beginning balance of Newport News (formerly
        New Hampton) which was acquired in 1993.

(2)     Other represents an adjustment to the allowance for returns to
        provide for the effect of an increase in sales activity on the
        Company's proprietary card.


                                         51

<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Spiegel, Inc., has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, on
March 29, 1996.

                                    SPIEGEL, INC.


                                    By:   /s/ John J. Shea                
                                          John J. Shea, President and
                                            Chief Executive Officer
                                     (Principal Operating Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of Spiegel, 
Inc., and in the capacities indicated on March 29, 1996.

<TABLE>
<CAPTION>

         Signature                               Title   
--------------------------          ------------------------------------------
<S>                                     <C>
/s/ John J. Shea                        Vice Chairman, President, Chief Executive
John J. Shea                            Officer and Director (Principal Operating
                                        Executive Officer)


/s/ James W. Sievers                    Senior Vice President - Finance and Chief
James W. Sievers                        Financial Officer (Principal Financial
                                        and Accounting Officer)


/s/ Kenneth A. Bochenski                Director
Kenneth A. Bochenski


/s/ Thomas Bohlmann                     Director
Thomas Bohlmann


/s/ Dr. Michael E. Crusemann            Director
Dr. Michael E. Crusemann


/s/ Harold S. Dahlstrand                Director
Harold S. Dahlstrand


/s/ David C. Moon                       Director
David C. Moon


/s/ Dr. Peter Muller                    Director
Dr. Peter Muller


</TABLE>

                                        52