<PAGE>

                                                                  CONFORMED COPY

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-K

    (Mark One)
    [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE  ACT OF 1934
    For the fiscal year ended ....................DECEMBER 30, 2000
                                       OR
    [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934
    For the transition period from ........................... to .............
    Commission file number ..............................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 (630) 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

On March 16, 2001, the aggregate market value of Class A non-voting common stock
held by non-affiliates (based on the closing price reported by NASDAQ National
Market on that date) was $101,737,587. The number of shares outstanding of the
issuer's Class A non-voting common stock at March 16, 2001 was 14,864,744.

The Class B voting common stock is not publicly traded and is 99.9% held by
affiliates. The number of shares outstanding of the issuer's Class B voting
common stock at March 16, 2001 were 117,009,869.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

Spiegel, Inc. ("The Spiegel Group" or "the Company") and its
predecessors date from 1865. The Company was incorporated under the
laws of Delaware in 1965. Spiegel Holdings, Inc., a Delaware
corporation ("SHI"), currently holds 99.9% 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").

In 1990, the Company acquired First Consumers National Bank ("FCNB").
FCNB is a special- purpose bank specializing in the issuance of
credit cards.

In 1993, the Company acquired New Hampton, Inc. ("New Hampton"). In
1995, New Hampton's name was changed to Newport News, Inc. ("Newport
News").

In 1997, the Company incorporated its Spiegel Catalog division
("Spiegel") as a separate subsidiary parallel to Eddie Bauer and
Newport News. This was done to provide greater clarity between the
Spiegel brand name and the corporate entity.

NARRATIVE DESCRIPTION OF BUSINESS ($000s omitted)

The Spiegel Group is a leading, international specialty retailer that
offers merchandise and credit services through a merchandising
segment and a bankcard segment.

                              MERCHANDISING SEGMENT

PRINCIPAL PRODUCTS, SERVICES, AND REVENUE SOURCES

The merchandising segment is an aggregation of the Company's Eddie
Bauer, Newport News and Spiegel subsidiaries which distribute
apparel, home furnishings and other merchandise through catalogs,
e-commerce sites and retail stores. The marketing efforts of these
businesses are supported by the Company's private-label FCNB
Preferred credit programs. In 2000, revenue related to the sale of
merchandise comprised approximately 95% of the merchandising
segment's total revenue. The remainder was contributed by finance
revenue generated from FCNB Preferred credit programs, including net
pretax gains recognized in conjunction with the securitization of
credit card receivables.

         PRODUCTS

         The merchandising segment has two principal product categories: apparel
         and home furnishings and other merchandise. The components of net sales
         by product category for the last three years were:

<TABLE>
<CAPTION>
                                               2000       1999       1998
                                              ------     ------     ------
               <S>                           <C>        <C>        <C>
               Apparel                           78%         79%        80%
               Home furnishings
                and other merchandise            22          21         20
                                              ------     ------     ------
                                                100%        100%       100%
</TABLE>

         The apparel category includes a wide array of men's and women's
         private-label and branded merchandise in various styles, including
         seasonal product offerings. Home furnishings range from traditional to
         contemporary styles, including accent pieces, decorative accessories,
         bed and bath, kitchen accessories and small appliances, home
         electronics, window treatments and rugs. The other merchandise category
         includes items such as fitness and personal care equipment, toys,
         cameras and luggage.


                                       2
<PAGE>

         CREDIT SERVICES

         In an effort to build brand loyalty and to provide additional
         convenience for its customers, the Company offers credit programs to
         qualifying customers in the form of its FCNB Preferred charge card. The
         card is imprinted with an Eddie Bauer, Newport News or Spiegel logo
         depending on the source of the original application for credit. This
         credit card allows a customer to purchase products from any Company
         affiliate, regardless of the imprint on the card. FCNB is the issuer of
         the FCNB Preferred charge card. The accounts are serviced through
         FCNB's headquarters located in Beaverton, Oregon.

         At December 30, 2000, FCNB Preferred credit card receivables serviced
         were $2,180,227, representing approximately 3 million active accounts.
         Approximately 42% of total net sales in 2000 were made on FCNB
         Preferred charge cards, including approximately 22% of Eddie Bauer net
         sales, 61% of Newport News net sales and 78% of Spiegel net sales. The
         lower percentage of Eddie Bauer sales made on the FCNB Preferred charge
         card is primarily attributable to the relatively higher percentage of
         retail store sales at Eddie Bauer. Retail stores generally have a lower
         percentage of sales made on credit compared to the direct channel,
         which is comprised of catalog and e-commerce sales.

         Deterioration in the credit market, increases in credit account
         charge-offs and interest rate fluctuations all represent risks to the
         profitability of the FCNB Preferred credit programs.

The following is a discussion of the merchant divisions included in the
merchandising segment that offer the products and services described above:

         EDDIE BAUER

         Eddie Bauer is a leading tri-channel specialty retailer serving the
         casual lifestyle needs of men, women and children through the sale of
         high quality private-label apparel, accessories and home furnishings.
         Eddie Bauer markets its products through stores, catalogs and
         e-commerce sites. Total net sales were $1,748,665 and $1,789,096 for
         the years ended December 30, 2000 and January 1, 2000, respectively.
         Approximately 73% of total net sales for Eddie Bauer are retail and
         outlet store sales. A key strategy for Eddie Bauer is to leverage
         synergies between its multiple distribution channels, maximizing
         cross-promotional opportunities. This strategy includes: referring
         retail store customers to catalog stations within stores for additional
         merchandise and size options; utilizing the catalog customer database
         to help identify potential store locations; using catalog space to
         advertise the retail concept and e-commerce sites; and utilizing retail
         store mailing lists to help build the catalog customer file.

         Eddie Bauer's apparel category comprised 85% of its total net sales in
         2000. Eddie Bauer presents its apparel and related accessories through
         its trademark Eddie Bauer apparel stores, outlet stores, catalogs and
         e-commerce sites including eddiebauer.com, eddiebauerhome.com,
         eddiebauerkids.com, eddiebaueroutlet.com and eddiebauerb2b.com. The
         apparel category includes full seasonal collections of fine quality
         sportswear and dress casual, outerwear, footwear and accessories. Eddie
         Bauer presents its comfortable, relaxed home furnishings and decor for
         the bed and bath through its Eddie Bauer HOME retail stores, catalogs
         and on its e-commerce sites.


                                       3
<PAGE>

         In 1993, Eddie Bauer entered into a joint-venture arrangement with
         Otto-Sumisho, Inc. (a joint venture company of Otto Versand, a related
         party, and Sumitomo Corporation) to sell its full line of Eddie Bauer
         sportswear products through retail stores and catalogs in Japan. At
         December 30, 2000 there were 41 such stores. During 1995, Eddie Bauer
         entered into an agreement with 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. At December 30, 2000 there were eight such stores. In 1996,
         Eddie Bauer entered into a joint-venture agreement with Grattan plc (a
         subsidiary of Otto Versand) to sell Eddie Bauer products through retail
         stores and catalogs in the United Kingdom. As of December 30, 2000, all
         such stores have been closed in conjunction with the discontinuation of
         the Grattan plc joint venture.

         Eddie Bauer has also capitalized on selected licensing opportunities,
         including a rich history with Ford Motor Company, which uses the Eddie
         Bauer name and logo on special series Ford vehicles, as well as
         arrangements with Gold Bug, Inc., The Lane Company (a division of
         Furniture Brands International); Compaq Computer Corporation, American
         Recreation Products, Inc.; Cosco, Inc., a manufacturer of infant and
         juvenile car seats and strollers; Baby Boom Consumer Products, Inc., a
         manufacturer of infant products, and Imperial Wall Coverings.

              EDDIE BAUER RETAIL STORE BUSINESS

              At December 30, 2000, Eddie Bauer operated a total of 563 stores:
              492 retail stores and 71 outlets. There are 523 stores located in
              the United States and 40 stores in Canada. Of the stores open at
              December 30, 2000, 41 were Eddie Bauer HOME. The average Eddie
              Bauer store is approximately 7,343 gross square feet. Eddie
              Bauer's retail stores are generally located in upscale regional
              malls or in high traffic metropolitan areas. Eddie Bauer also
              opens stores 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 are located predominately in outlet malls and value strip
              centers and generally in areas not serviced by its core specialty
              retail stores. Eddie Bauer's outlet store strategy includes the
              liquidation of excess inventory while also offering products made
              exclusively for the outlet stores. Plans are to grow the scope and
              reach of the outlet division to maximize sales and profit
              opportunities that exist within the moderately priced market
              segment.

              In 2000, Eddie Bauer completed 20 significant remodels of existing
              stores in addition to increasing its new-store growth pace,
              opening a net of 31 stores compared to nine in 1999. The average
              cost of opening a typical new Eddie Bauer store in 2000, including
              inventory, furniture and fixtures, pre-opening expenses and
              leasehold improvements (net of landlord construction allowances)
              was approximately $824. 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 DIRECT BUSINESS

              The Eddie Bauer Direct business serves its customers through
              catalogs and five e-commerce sites. The Eddie Bauer direct
              business distributed 100 million catalogs in 2000 and at December
              30, 2000 had approximately 3.6 million active customers (customers
              who have purchased within the last 18 months from either the
              catalogs or e-commerce sites.) As a corollary to its retail store
              operations, Eddie Bauer catalog concepts include its trademark
              Eddie Bauer apparel catalog and Eddie Bauer HOME catalogs, as well
              as its largest catalog, Eddie Bauer Resource. Eddie Bauer actively
              pursues new customers within its target market through initiatives
              such as list rentals, utilizing names of its store customers and
              e-commerce marketing programs.


                                       4
<PAGE>

         NEWPORT NEWS

         Newport News is a specialty direct marketer offering fashionable,
         moderately priced women's apparel and home furnishings through catalogs
         and its e-commerce site, newport-news.com. Total net sales were
         $479,098 for the year ended December 30, 2000, compared to $410,804 for
         the year ended January 1, 2000. Newport News distributed 238 million
         catalogs in 2000 and at December 30, 2000 had approximately 4.2 million
         active customers (customers who have purchased within the last 18
         months from either the catalogs or e-commerce site).

         The Newport News apparel category comprised 88% of its sales in 2000.
         Although Newport News specializes in swimwear and jeans, all women's
         apparel categories, including footwear, are well represented. The
         Newport News home furnishings category consists primarily of bed, bath
         and decorative accessories.

         SPIEGEL

         A direct marketer, Spiegel has developed its strong brand identity by
         working to understand and satisfy its customers with a broad assortment
         of sophisticated, high-quality apparel and home merchandise marketed
         through its semi-annual catalog, various specialty catalogs and
         e-commerce sites including spiegel.com. Spiegel offers overstock,
         end-of-season and other merchandise through its Ultimate Outlet
         stores, which are predominately located in outlet malls, catalogs and
         the ultimateoutlet.com e-commerce site. Total net sales were $833,388
         and $716,555 for the years ended December 30, 2000 and January 1,
         2000, respectively. Sales through its direct channel comprised
         approximately 92% of total net sales. Spiegel distributed over 149
         million catalogs in 2000 and at December 30, 2000 had approximately
         3.3 million active customers (customers who have purchased within the
         last 18 months from either the catalogs or e-commerce sites).

         Spiegel's apparel merchandise, which represented 55% of net sales in
         2000, includes private-label and branded merchandise. Private-label
         merchandise is developed by in-house product design teams based on
         emerging fashion trends and customer research. Spiegel's home
         furnishings and other merchandise, which represented 45% of net sales
         in 2000, are a mixture of private-label and branded merchandise ranging
         from traditional to contemporary styles, including accent pieces,
         decorative accessories, bed and bath, kitchen accessories and small
         appliances, home electronics, window treatments and rugs.

PRODUCT DEVELOPMENT AND SOURCING

The merchandising segment's product development and sourcing teams
are a significant element of its private-label merchandise strategy.
Manufacturers are selected based on their ability to produce high
quality product on a cost-effective basis. 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 merchant divisions 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.

                                       5
<PAGE>

MERCHANDISE

The merchant divisions sell domestically produced and imported
merchandise, which is purchased in the open market from approximately
2,500 suppliers, none of which supplied as much as 5% of the
merchandise purchased during 2000. A significant amount of the dollar
value of merchandise purchased 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 to 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, if any, of the above; however, the Company
believes this risk exists for many other retailers.

LICENSES AND TRADEMARKS

The Company's merchandising divisions utilize trademarks and
tradenames including "Spiegel," "Eddie Bauer," "Newport News," "The
Ultimate Outlet," "Jeanology" and "Easy Style." The Company also is
licensed to sell goods under the "Together!" and "Apart" labels among
others. The Company utilizes numerous other trademarks and
tradenames, however, believes that the loss or abandonment of the
above named trademarks, tradenames or licenses would have the most
significant effect on its business.

SEASONALITY OF BUSINESS

The merchant divisions, like other retailers, have experienced and
expect to continue to experience seasonal fluctuations in merchandise
sales and net earnings. Historically, a significant amount of the
merchandising segment's net sales and a majority of its net earnings
have been realized during the fourth quarter. If sales were
materially different from seasonal norms during the fourth quarter,
the merchandising segment'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 merchant divisions participate are highly
competitive and served by a significant number of retailers including
direct marketers, traditional department stores, so-called
"off-price" and discount retailers and specialty chains. Success is
highly dependent upon the merchant group's ability to maintain its
existing customers, solicit new customers, identify distinct fashion
trends and continue to address the lifestyle needs and style
preferences of its customers. The Company believes it is positioned
to compete effectively in all channels of distribution, including
stores, catalog and the e-commerce market, supported by its strong
infrastructure.

EMPLOYEES

During 2000, the merchandising segment employed between approximately
11,800 and 14,800 full-time equivalent employees, depending on the
time of year, reflecting the seasonality of the merchandising
business and the fluctuations in its workforce during the year. At
February 24, 2001, the merchandising segment employed approximately
11,000 full-time equivalent employees.

                                       6
<PAGE>

Spiegel is party to a collective bargaining agreement with 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"). Local 743 represents approximately 50 full-time employees
under an agreement that expires on February 28, 2002. In addition,
Spiegel is party to a separate agreement with Local 743, which
expires on May 31, 2003 that covers approximately 25 full-time and 29
part-time Chicago-area Spiegel outlet store employees.

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.

PROPERTIES

The Company's corporate headquarters and Spiegel operations are
located in leased office space in Downers Grove, Illinois. The
Company owns its Westmont, Illinois corporate data center.

The following information is specific to the merchandising segment:
Eddie Bauer occupies office space in 10 buildings located in and
around Redmond, Washington; three of which are owned and seven of
which are under lease. Newport News leases office space in New York,
New York, in addition to leasing a facility in Hampton, Virginia
where its order taking, customer service and administrative functions
are performed. The Company also leases customer order and customer
service facilities in Wichita, Kansas; Rapid City, South Dakota;
Bothell, Washington; Trevose, Pennsylvania and St. John, New
Brunswick, Canada.

All retail store locations are also 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 Eddie Bauer and Spiegel retail and catalog distribution functions
are performed in two owned facilities in Groveport and Columbus,
Ohio. An additional retail distribution facility is leased in
Toronto, Canada to support the Eddie Bauer retail stores located in
Canada. The Newport News distribution function is performed in an
owned facility in Newport News, Virginia.

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

                                BANKCARD SEGMENT

The bankcard business markets various national MasterCard and Visa
programs that are managed through FCNB, the Company's special-purpose
bank. FCNB's leased headquarter and call center operations are
located in Oregon in the cities of Beaverton and Albany,
respectively. The Company's bankcard portfolio includes secured
cards, co-branded cards and affinity cards, such as the FCNB
MasterCard, the FCNB Visa, the Spiegel MasterCard, the Eddie Bauer
MasterCard and the Adelante MasterCard. The bankcard segment's
revenue is comprised primarily of finance revenue and credit-related
fees generated from the bankcard credit programs and includes net
gains recognized in conjunction with the securitization of bankcard
receivables.

At December 30, 2000, bankcard receivables serviced were $1,143,278,
representing approximately 934 thousand active accounts. The credit
market is highly competitive and is served by numerous lenders. The
bankcard segment's ability to compete in this environment is
dependent on its ability to develop credit programs that attract and
retain credit customers. The bankcard segment has capitalized on
bankcard programs that offer customized service to targeted niches in
the credit industry, which contributed to its significant growth in
2000.

In 2001, the bankcard segment intends to continue to grow its
portfolio through initiatives aimed at customer acquisition and
retention and increasing average account

                                       7
<PAGE>

balances. This will entail the continued development and marketing of
customized bankcard credit programs, including programs specific to
the Company's merchant divisions.

During 2000, FCNB employed an average of approximately 1,075
employees. At February 24, 2001, FCNB employed approximately 1,208
full-time equivalent employees, a reflection of the growth of the
bankcard business.

Deterioration in the credit market, increases in credit account
charge-offs and interest rate fluctuations all represent risks to the
profitability of the Company's bankcard credit operations.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

Information regarding revenue, operating income and assets of the
Company's merchandising and bankcard segments for each of the three
fiscal years ended December 30, 2000, January 1, 2000 and January 2,
1999, is incorporated herein by reference to Note 13 "Segment
Reporting" of Part II, Item 8 "Notes to Consolidated Financial
Statements" of this Form 10-K. For additional information, see also
the above description of business and Part II, Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."

ITEM 2.  PROPERTIES

Information regarding the principal properties of the Company is incorporated
herein by reference to page 7 of Item 1 hereof.

ITEM 3.  LEGAL PROCEEDINGS

The Company is routinely involved in a number of legal proceedings and claims,
which 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.


                                       8
<PAGE>

                                     PART II

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

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 sale
prices of the Class A non-voting common stock.

On March 16, 2001, the closing market price of the Class A non-voting common
stock, as quoted on the NASDAQ National Market System, was $6.88 per share.

The Class B voting common stock is not publicly traded. Therefore, no market
value information is readily available on this class of stock. However, the
Company believes the value of the Class B voting common stock approximates
the market value of the Class A non-voting common stock as both classes of
stock are equal in all respects, with the exception of voting rights.

HOLDERS

There were approximately 7,200 Class A non-voting common stockholders as of
March 16, 2001. 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. As of the
date hereof, there were two Class B voting common stockholders.

DIVIDENDS

In fiscal 2000, the Company declared and paid three quarterly cash dividends
to shareholders of record of both Class A non-voting common stock and Class B
voting common stock at a rate of $0.04 per share. No dividends were paid
during 1999. The Company expects to continue to make comparable quarterly
dividend payments at a rate of $0.04 per share in fiscal 2001.

                                       9
<PAGE>

ITEM 6.  FIVE-YEAR SELECTED FINANCIAL DATA
($000s omitted, except per share amounts)


<TABLE>
<CAPTION>
                                    2000          1999          1998          1997          1996
EARNINGS DATA                ------------  ------------  ------------  ------------  ------------
<S>                          <C>           <C>           <C>           <C>           <C>
Net sales and
 other revenues (1)          $ 3,724,778   $ 3,414,703   $ 3,107,793   $ 3,246,856   $ 3,215,711
Earnings (loss) before
 income taxes                    196,024       137,127        18,110       (49,406)      (21,276)
Net earnings (loss) (2),(3)      120,818        85,330         3,270       (33,021)      (13,389)
Net earnings (loss) per
 common share (2),(3)
   Basic and diluted                0.92          0.65          0.03         (0.28)        (0.12)
Cash dividends per
 common share                $      0.12   $         -   $         -   $         -   $        -


BALANCE SHEET AND CASH FLOW DATA

Current assets               $ 1,982,214   $ 1,664,144   $ 1,255,494   $ 1,244,823   $ 1,231,535
Total assets                   2,583,019     2,242,040     1,857,260     1,949,554     1,945,625
Current liabilities              947,904       858,919       663,251       637,222       697,250
Long-term debt,
 excluding current maturities    686,857       566,572       523,036       713,750       676,656
Stockholders' equity             827,482       725,140       637,267       565,600       519,695
Net additions to
 property and equipment           65,771        38,484        28,610        55,047        45,698
Depreciation and
 amortization                $    78,235   $    94,683   $    88,547   $    88,062   $    95,278
</TABLE>


(1)   Certain prior year amounts have been reclassified from amounts previously
      reported to conform with the 2000 presentation; see Note 1 to the
      consolidated financial statements.
(2)   Includes a charge of $4,076, or $0.03 per share, for the cumulative effect
      of an accounting change related to the recognition of membership fee
      revenue; see Note 2 to the consolidated financial statements.
(3)   Includes a charge of $8,535, or $0.06 per share, for the redemption of
      subsidiary preferred stock; see Note 12 to the consolidated financial
      statements.


                                       10
<PAGE>

ITEM     7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS ($000s omitted, except per share amounts)

RESULTS OF OPERATIONS

For the fiscal year ended December 30, 2000 (2000), consolidated operating
income increased $66,412 to $270,250 from $203,838 for the fiscal year ended
January 1, 2000 (1999). Operating income for the fiscal year ended January 2,
1999 (1998) totaled $85,843. Favorable performance of the Company's bankcard
segment, offset somewhat by a lower contribution from the merchandising segment,
drove the earnings improvement in 2000. The Company's merchandising segment
drove the improvement in 1999 operating results.

Interest expense totaled $74,226, $66,711 and $67,733 in 2000, 1999 and 1998,
respectively. The increase in interest expense in 2000 resulted primarily from
higher average debt levels compared to the prior year, as well as a general
increase in interest rates on the Company's outstanding borrowings. Higher
average debt levels were driven by funding requirements to support credit card
receivables growth and increased inventory levels. Somewhat offsetting the
increase in interest expense in 2000 was a decrease in debt-related fees
compared to 1999. Interest expense in 1999 benefited from lower average debt
levels compared to 1998. Average debt was $905,571, $784,962 and $853,749 in
2000, 1999 and 1998, respectively.

The Company's consolidated effective tax rate was 36.3% in 2000 compared to
37.8% in 1999 and 34.8% in 1998. Changes in earnings mix among the Company's
various divisions affected state tax rates for all years presented. The Company
assesses its effective tax rate on a continual basis.

In 2000, consolidated net earnings of $120,818, or $0.92 per share, included a
cumulative effect of accounting change of $4,076 (net of income tax benefit of
$2,503) recorded in response to Staff Accounting Bulletin No. 101, "Revenue
Recognition." Earnings before cumulative effect of accounting change totaled
$124,894, or $0.95 per share, a 46% increase over the prior year. The accounting
change did not have a material impact on 2000 earnings. Net earnings were
$85,330, or $0.65 per share, in 1999, and $3,270, or $0.03 per share, in 1998.
Net earnings in 1998 included the redemption of subsidiary preferred stock,
which reduced net earnings by $8,535, or $0.06 per share. All references to
earnings per share are on a diluted basis.

Segment results:

Operating results for the Company are reported for two segments: merchandising
and bankcard. The merchandising segment is an aggregation of the Company's three
merchant divisions: Eddie Bauer, Newport News and Spiegel, and includes the
private-label FCNB Preferred credit operation. The bankcard segment represents
the bankcard operations of First Consumers National Bank (FCNB), the Company's
special-purpose bank. The Company allocates corporate expenses to both segments
based on an equitable division of costs.

The Company routinely securitizes FCNB Preferred credit card and FCNB bankcard
receivables to fund the growth of its receivables portfolios. When the Company
securitizes credit card receivables, it retains interest-only strips,
subordinated investor certificates, receivables, servicing rights and cash
reserve accounts, all of which are retained interests in the securitized
receivables. Gains or losses on the sale of receivables depends in part on the
previous carrying amount of the financial assets involved in the transfer,
allocated between the assets sold and the retained interests based on their
relative fair value at the date of transfer. Quoted market prices are not
available for retained interests, so the Company estimates the fair value based
on the present value of future expected cash flows using management's best
estimates of the key assumptions including portfolio yield, charge-offs,
liquidation rates, interest rates and discount rates commensurate with the risks
involved. Gains and losses recognized upon securitization of credit card
receivables and subsequent fair value adjustments to


                                       11
<PAGE>

retained interests are recorded as net pretax gains on the sale of receivables
and are included in finance revenue.

Also included in finance revenue are cash flows from the trust resulting from
these retained interests. This retained-interest income represents the excess
cash flows related to securitized receivables that revert to the Company after
payment of interest to investors, related charge-offs and servicing fees.

Certain prior year amounts in the merchandising segment have been reclassified
to conform with the 2000 presentation, primarily related to the reclassification
of shipping and handling revenue from selling, general and administrative (SG&A)
expense to other revenue in response to Emerging Issues Task Force Issue No.
00-10. The Company also reclassified certain occupancy expense from cost of
sales to SG&A expense. All ratios presented reflect these reclassifications,
including gross profit margin as a percent of total net sales and SG&A expense
as a percent of total revenue.

Merchandising Segment
<TABLE>
<CAPTION>
                                           2000             1999             1998
                                     -----------      -----------      -----------
<S>                                  <C>              <C>              <C>
Catalog net sales                    $1,483,737       $1,445,174       $1,291,857
E-commerce net sales                    227,424           76,126           18,623
                                     -----------      -----------      -----------
Total direct net sales                1,711,161        1,521,300        1,310,480
Retail store net sales                1,349,990        1,395,155        1,331,476
                                     -----------      -----------      -----------
Total net sales                       3,061,151        2,916,455        2,641,956
Finance revenue                         191,511          166,344          138,033
Other revenue                           292,344          251,031          214,604
                                     -----------      -----------      -----------
Total revenue                        $3,545,006       $3,333,830       $2,994,593
                                     -----------      -----------      -----------
Operating income                     $  179,291       $  189,960       $   21,601
                                     -----------      -----------      -----------
% change vs prior year:
Total net sales                              5%              10%              -7%
Comparable-store sales                      -8%               6%              -9%
Total revenue                                6%              11%              -4%
                                     -----------      -----------      -----------
Gross profit margin
 (% of total net sales)                   38.3%            37.6%            32.7%
SG&A expenses
 (% of total revenue)                     41.6%            39.7%            39.9%
Operating income
 (% of total revenue)                      5.1%             5.7%             0.7%
                                     -----------      -----------      -----------
</TABLE>

2000 Compared With 1999
Operating income for the merchandising segment was $179,291 for 2000 compared to
$189,960 for 1999. Positive sales growth and margin performance at Newport News
and Spiegel, accompanied by favorable results from the FCNB Preferred credit
operations, were offset by declines at Eddie Bauer. Eddie Bauer remained
profitable in 2000; however, weak customer response to its apparel offerings led
to lower sales volume and higher markdowns, which drove results significantly
below the prior year.


                                       12
<PAGE>

Total merchandising revenue increased $211,176, or 6%, in 2000 compared to 1999.
The growth in revenue reflects a 5% increase in net sales and a 15% increase in
finance revenue from the FCNB Preferred credit programs. Also contributing to
the revenue growth was an increase in other revenue driven primarily by
volume-related increases in shipping and handling revenue. The 5% net sales
increase included a 12% increase in direct net sales offset by a 3% decline in
retail store net sales.

The direct sales channel is comprised of catalog and e-commerce sales. Growth in
e-commerce drove a majority of the increase in net sales, rising 199% in 2000
over the prior year. Catalog net sales increased 3% for the year, as declines at
Eddie Bauer substantially offset strong sales growth at Newport News and
Spiegel. Newport News and Spiegel continued to benefit from positive customer
response to merchandise offerings on increased catalog circulation. Successful
marketing initiatives, such as the private-label credit programs, benefited
Newport News and Spiegel as both divisions experienced increases in their
customer files and strong customer retention. Retail store net sales declined 3%
for the year, reflecting an 8% decline in Eddie Bauer comparable-store sales,
partially offset by higher outlet store sales. The decline in Eddie Bauer's
comparable-store sales reflects strength in its home business offset by weak
customer response to its apparel offerings.

FCNB Preferred credit finance revenue increased 15% to $191,511 in 2000 from
$166,344 in 1999. The increase in finance revenue resulted from an increase in
average receivables owned and an increase in net pretax gains related to the
securitization of credit card receivables. Average receivables owned increased
58%, reflecting sales growth at Newport News and Spiegel accompanied by an
increase in customer utilization of the private-label credit programs. An
improved finance charge yield on average receivables serviced resulted from
higher interest rates charged on variable-rate credit accounts due to increases
in the prime interest rate. This improvement was more than offset by a lower
credit fee yield and an increase in finance charge and credit fee write-offs.
Retained-interest income was negatively impacted by an increase in charge-offs
on securitized receivables compared to last year. The Company sold additional
FCNB Preferred credit card receivables of $506,021 and $84,251 in 2000 and 1999,
respectively. Net pretax gains on the sale of receivables included in finance
revenue totaled $28,347 and $18,918 in 2000 and 1999, respectively. Gains
related to the sale of receivables in the current year were slightly offset by
declines in the fair value of retained interests, primarily resulting from an
increase in charge-offs compared to the prior year.

Gross profit margin on net sales for the merchandising segment increased 70
basis points to 38.3% in 2000 from 37.6% in 1999. Significant margin improvement
at Spiegel and a favorable margin performance at Newport News were partially
offset by margin declines at Eddie Bauer. Margin declines at Eddie Bauer reflect
higher markdowns taken to manage inventories compared to the prior year.

The SG&A expense ratio increased 190 basis points to 41.6% of total revenue in
2000 compared to 39.7% in 1999. Lower sales productivity on catalog circulation
at Eddie Bauer and Spiegel drove the increase. Also contributing to the increase
was a lack of operating expense leverage at Eddie Bauer due to lower sales, an
increase in investments in e-commerce marketing initiatives and site
enhancements, as well as the impact of certain non-recurring items. Lower
operating expenses and the reversal of the allowance for doubtful accounts
related to securitized receivables somewhat mitigated higher charge-offs
experienced in the FCNB Preferred credit card receivables.

Non-recurring charges, which increased the SG&A ratio by approximately 60 basis
points in 2000, included expenses related to organizational changes, as well as
the disposition of certain impaired assets, including information
technology-related assets. Non-recurring charges in 1999 increased the SG&A
ratio by approximately 60 basis points, and included costs associated with the
closure of seven Eddie Bauer stores in the United Kingdom as well as the
write-off of certain impaired assets, primarily leasehold improvements, at Eddie
Bauer and Spiegel.


                                       13
<PAGE>

1999 Compared With 1998
Merchandising operating income increased substantially in 1999 to $189,960, a
$168,359 improvement over 1998. Significantly improved gross margin performance
on increased sales was the key factor contributing to the progress in the
merchandising segment. In addition, the SG&A expense ratio declined due to the
higher revenue base and stringent cost-containment initiatives. The
merchandising segment also benefited from a positive earnings contribution from
the FCNB Preferred credit programs.

Total merchandising revenue increased $339,237, or 11%, in 1999 compared to
1998. The growth in revenue was primarily attributed to a 10% increase in net
sales, coupled with an increase in revenue from the FCNB Preferred credit
programs. The 10% net sales increase, driven by favorable customer response to
refined product offerings, included a 16% increase in direct net sales and a 5%
increase in retail store net sales.

The direct sales channel is comprised of catalog and e-commerce sales. The
increase in direct sales included a 12% increase in catalog net sales and a 309%
increase in e-commerce net sales. Solid sales increases at Spiegel and Newport
News, slightly offset by a decrease at Eddie Bauer, drove growth in catalog net
sales. Eddie Bauer catalog sales were lower than the prior year, reflecting a
planned decrease in pages circulated to marginal customers, which was partially
offset by gains in productivity. All merchant divisions experienced an increase
in e-commerce sales. Retail store net sales results included a 6% increase in
Eddie Bauer comparable-store sales, reflecting positive customer response to
stronger, more focused merchandise offerings and an improved inventory position
compared to 1998.

Finance revenue for 1999 was 21% higher than the prior year, primarily due to
growth in the portfolio as well as improved productivity. The average FCNB
Preferred credit card receivables serviced increased 9% compared to 1998, due to
higher sales at the merchant companies accompanied by an increase in customer
utilization of FCNB Preferred credit programs. Additionally, the FCNB Preferred
credit programs realized improved yields and lower charge-offs from reduced
delinquencies, resulting in an increase in retained-interest income recognized
as finance revenue from the Company's retained interests in securitized credit
card receivables. Finance revenue included net pretax gains on the sale of
receivables of $18,918 in 1999 compared to $11,757 in 1998.

Merchandising gross profit margin on net sales increased 490 basis points to
37.6% in 1999 from 32.7% in 1998. The improved margin performance, driven by
Spiegel and Eddie Bauer, resulted from strong customer response to merchandise
offerings and in turn, lower markdowns compared to the prior year.

The SG&A expense ratio benefited from the substantial increase in revenue, at
39.7% of total revenue for 1999, a 20 basis point improvement over 1998.
Stringent cost controls and a higher level of sales productivity on catalog
mailings drove the ratio improvement. The improvement was offset somewhat by
incremental expense recorded to increase the allowance for doubtful accounts due
to the substantial growth in FCNB Preferred credit card receivables.
Additionally, the ratio declined despite non-recurring charges taken, primarily
in the fourth quarter of 1999, to recognize the disposition of certain assets.
These non-recurring charges increased the SG&A expense ratio by approximately 60
basis points in 1999 and included costs associated with the closure of seven
Eddie Bauer stores in the United Kingdom as well as the write-off of certain
impaired assets, primarily leasehold improvements, at Eddie Bauer and Spiegel.


                                       14
<PAGE>

Bankcard Segment
<TABLE>
<CAPTION>
                                              2000              1999              1998
                                         ----------         ----------       ----------
<S>                                      <C>                <C>              <C>
Total revenue                            $ 179,772          $  80,873        $ 113,200

Operating income                         $  96,366          $  21,242        $  70,344
                                         ----------         ----------       ----------
</TABLE>

2000 Compared With 1999

Bankcard revenue increased 122% to $179,772 in 2000, compared to $80,873 in
1999. The growth in revenue was primarily attributable to a 47% increase in
average receivables owned, higher retained-interest income and an increase in
net pretax gains on the sale of receivables. Finance charge income on average
receivables serviced benefited from higher interest rates charged on
variable-rate credit accounts due to increases in the prime interest rate.
However, the net yield declined somewhat due to a lower credit fee yield.
Retained-interest income increased significantly compared to the prior year, as
the prior year was negatively impacted by an increase in charge-offs related to
certain bankcard test programs. The Company sold an additional $374,000 of
bankcard receivables in 2000. Net pretax gains on the sale of receivables,
combined with adjustments to record retained interests at fair value,
contributed $42,627 to finance revenue in 2000. Comparatively, finance revenue
in 1999 was reduced by $3,158, as gains related to new securitizations were more
than offset by losses recorded to adjust retained interests to fair value.

Operating income for the bankcard segment increased significantly in 2000 to
$96,366, compared to $21,242 in 1999. In addition to the revenue growth
described above, the bankcard segment benefited from improved charge-off rates,
due in part to a shift in the portfolio mix to lower-risk credit products
relative to the prior year.

1999 Compared With 1998

Bankcard revenue declined 29% in 1999 compared to the prior year. Overall,
bankcard revenue from serviced receivables grew by 45% in 1999. However, total
revenue decreased compared to the prior year, primarily due to the
securitization of bankcard receivables. While net pretax gains on the sale of
receivables of $33,571 favorably impacted revenue in 1998, revenue in 1999 was
reduced by $3,158, reflecting minor revisions in the assumptions utilized to
calculate net pretax gains. Excluding the impact of securitization activity,
1999 bankcard revenue increased 6% over 1998, driven by significant growth in
the average receivables serviced.

Bankcard operating income declined in 1999 compared to the prior year, primarily
due to lower revenue. This performance reflected non-comparable items that
benefited the prior year, including the aforementioned gain recognition and the
impact of certain bankcard test programs initiated in late 1997 and early 1998.
In general, newly issued credit programs generate finance revenue without the
immediate corresponding charge-offs associated with extending credit. Operating
income in 1998 benefited from this initial phase, while the 1999 results
reflected the full impact of these credit programs. Excluding these
non-comparable items, bankcard earnings increased over the prior year,
reflecting strong growth and favorable operating trends.


                                       15
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically met its operating and cash requirements through
funds generated from operations, the securitization of credit card receivables
and the issuance of debt and common stock. Total credit card receivables sold
were $2,520,002 at December 30, 2000 and $1,639,981 at January 1, 2000.

Net cash provided by operating activities totaled $202,217 for 2000 compared to
net cash used in operating activities of $149,193 for 1999. Cash provided by
securitization activity increased $660,770 over the prior year, minimizing the
need to fund the significant growth in credit card receivables through other
sources. Excluding receivables, net cash flow from operations improved $11,475
compared to the prior year. Favorable operating results and cash provided by the
issuance of jumbo certificates of deposit by the Company's special-purpose bank
drove the improvement, substantially offset by increased investment in
inventories to support sales growth and targeted service levels. Total
inventories ended 2000 13% higher than 1999.

Net cash used in investing activities totaled $102,500 for 2000 compared to
$70,813 for the prior year. Expenditures in the current year were comprised
primarily of Eddie Bauer retail store expansion and remodeling, distribution
facility upgrades and information technology-related equipment and development.

The Company maintains restricted cash accounts as necessary, representing
reserve funds used as credit enhancement for specific classes of investor
certificates issued in certain asset-backed securitization transactions. These
restricted cash accounts are included in other assets in the Company's
consolidated balance sheets. The discounted value of these accounts was $5,391
and $10,192 at December 30, 2000 and January 1, 2000, respectively. In 1998,
restricted cash of $49,400 was released to the Company when the related
asset-backed securitizations matured.

As of December 30, 2000, total debt was $794,571 compared to $781,036 as of
January 1, 2000. The Company realized an increase in total debt in 2000, driven
by funding requirements of its credit operations, primarily to support credit
card receivable growth, and increased inventory levels. The Company plans to
continue to utilize asset-backed securitization of credit card receivables as a
source of funds to manage debt and help fund the growth of its credit
businesses.

In April 2000, the Company announced it would resume regular quarterly dividend
payments of $0.04 per share. Dividend payments totaled $15,822 in 2000.

In 1998, the Company issued 13,526,571 shares of Class B voting common stock to
its majority shareholder, Spiegel Holdings, Inc. The net proceeds of $69,993
were used primarily to fund working capital and investing needs.

In March 1994 and December 1995, Newport News issued shares of non-voting
redeemable preferred stock to certain directors and executive officers of the
Company, its subsidiaries and Otto Versand. All outstanding shares were redeemed
in 1998 for $12,236. The excess of the redemption price over the carrying value
of the preferred stock reduced 1998 net earnings by $8,535 and the related basic
and diluted net earnings per common share by $0.06.

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


                                       16
<PAGE>

MARKET RISK

The Company is exposed to market risk from changes in interest rates, the
securitization of credit card receivables and, to a lesser extent, foreign
currency exchange rate fluctuations. In seeking to minimize risk, the Company
manages exposure through its regular operating and financing activities and,
when deemed appropriate, through the use of derivative financial instruments.
The Company does not use financial instruments for trading or other speculative
purposes and is not party to any leveraged financial instruments.

Interest rates

The Company manages interest rate exposure through a mix of fixed- and
variable-rate financings. The Company is generally able to meet certain targeted
objectives through its direct borrowings. Substantially all of the Company's
variable-rate exposure relates to changes in the one-month LIBOR rate. If the
one-month LIBOR rate had changed by 50 basis points, the Company's interest
expense in 2000 would have changed by approximately $1,934. In addition, the
Company occasionally utilizes derivative financial instruments to reach its
targeted objectives. Interest rate swaps may be used to minimize interest rate
exposure when appropriate based on market conditions. The notional amounts of
the Company's interest rate swap agreements totaled $58,571 at December 30,
2000.

The Company believes that its interest rate exposure management policies,
including the use of derivative financial instruments, are adequate to manage
material market risk exposure.

Securitizations

In conjunction with its asset-backed securitizations, the Company recognizes
gains representing the present value of estimated future cash flows that the
Company expects to receive over the estimated outstanding securitization period.
These future cash flows consist of an estimate of the excess of finance charges
and fees over the sum of the interest paid to certificate holders, contractual
servicing fees and charge-offs along with the future finance charges and
principal collections related to retained interests in securitized receivables.
Certain estimates inherent in determining the present value of these estimated
future cash flows are influenced by factors outside the Company's control, and,
as a result, could materially change in the near term. Additional information
regarding the securitization of credit card receivables is included in Note 4 to
the consolidated financial statements.

Foreign Currency Exchange Rates

The Company is subject to foreign currency exchange rate risk related to its
Canadian operations, as well as its joint venture investments in Germany and
Japan. The Company is party to certain transactions with the above joint
ventures that are denominated in foreign currencies. The Company monitors the
exchange rates related to these currencies on a continual basis and will enter
into forward derivative contracts for foreign currency when deemed advantageous
based on current pricing and historical information. The Company believes that
its foreign exchange rate risk and the effect of this hedging activity are not
material due to the size and nature of the above operations.


                                       17
<PAGE>

ACCOUNTING STANDARDS

Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," and No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities," establish
accounting and reporting standards for derivatives and for hedging activities.
As issued, SFAS No. 133 was effective for all quarters of all years beginning
after June 15, 1999. In June 1999, SFAS No. 137 was issued, effectively
deferring the date of required adoption of SFAS No. 133 to quarters of all years
beginning after June 15, 2000. Due to its limited use of derivative instruments,
the Company does not expect the adoption of the above standards to have a
material effect on its consolidated results of operations or financial position.
The Company will adopt SFAS No. 133 and No. 138, as required, in fiscal year
2001.

Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
supercedes SFAS No. 125. SFAS No. 140 establishes new conditions for an entity
to be a qualifying special-purpose entity and clarifies under what conditions a
transferor has retained effective control over transferred assets. The updated
rules for transfers of financial assets are effective for transfers occurring
after March 31, 2001 and generally do not affect the accounting for previous
transfers. Early adoption of the new rules is not allowed. The Company does not
expect adoption of SFAS No. 140 to have a material effect on its consolidated
results of operations or financial position.

FORWARD-LOOKING STATEMENTS

This report contains statements that are forward-looking within the meaning of
applicable federal securities laws and are based upon the Company's current
expectations and assumptions. Words such as "expect," "plan," "believe,"
"anticipate" and similar expressions identify forward-looking statements. Any
such forward-looking statements are subject to a number of risks and
uncertainties that could cause actual results to differ materially from those
anticipated. Potential risks and uncertainties include, but are not limited to,
factors such as the financial strength and performance of the retail and direct
marketing industry, changes in consumer spending patterns, dependence on the
securitization of credit card receivables to fund operations, state and federal
laws and regulations related to offering and extending credit, risks associated
with collections on the Company's credit card portfolio, interest rate
fluctuations, postal rate increases, paper or printing costs, the success of
planned merchandising, advertising, marketing and promotional campaigns, and
other factors that may be described in the Company's other filings with the
Securities and Exchange Commission.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information contained in Part II, Item 7. under the caption "Market Risk" on
pages 15-16 of this Form 10-K is incorporated herein by reference.


                                       18
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

<TABLE>
<CAPTION>
                                                 December 30,       January 1,
                                                        2000             2000
                                                ------------     ------------
<S>                                              <C>              <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                      $   143,822      $    46,023
  Receivables, net                                 1,113,451          971,566
  Inventories                                        562,863          499,413
  Prepaid expenses                                   109,220          101,915
  Refundable income taxes                                  -            3,830
  Deferred income taxes                               52,858           41,397
                                                 ------------     ------------
    Total current assets                           1,982,214        1,664,144
Property and equipment, net                          347,557          333,852
Intangible assets, net                               142,730          148,143
Other assets                                         110,518           95,901
                                                 ------------     ------------
    Total assets                                 $ 2,583,019      $ 2,242,040
                                                 ============     ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current maturities of debt                     $   107,714      $   214,464
  Accounts payable and accrued liabilities           813,553          644,455
  Income taxes payable                                26,637                -
                                                 ------------     ------------
    Total current liabilities                        947,904          858,919
Long-term debt, excluding current maturities         686,857          566,572
Deferred income taxes                                120,776           91,409
                                                 ------------     ------------
    Total liabilities                              1,755,537        1,516,900
                                                 ------------     ------------
STOCKHOLDERS' EQUITY:
 Class A non-voting common stock, $1.00 par
   value; authorized 16,000,000 shares;
   14,855,244 shares issued and outstanding at
   December 30, 2000; 14,849,244 shares
   issued and outstanding at January 1, 2000          14,855           14,849
 Class B voting common stock, $1.00 par value;
   authorized 121,500,000 shares; 117,009,869
   shares issued and outstanding                     117,010          117,010
 Additional paid-in capital                          329,015          328,984
 Accumulated other comprehensive loss                 (5,299)          (2,608)
 Retained earnings                                   371,901          266,905
                                                 ------------     ------------
    Total stockholders' equity                       827,482          725,140
                                                 ------------     ------------
    Total liabilities and stockholders' equity   $ 2,583,019      $ 2,242,040
                                                 ============     ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       19
<PAGE>

CONSOLIDATED STATEMENT OF EARNINGS

For years ended ($000s omitted, except per share amounts)
<TABLE>
<CAPTION>
                                         December 30,      January 1,      January 2,
                                                2000            2000            1999
                                         ------------    ------------    ------------
<S>                                      <C>             <C>             <C>
NET SALES AND OTHER REVENUES
Net sales                                $ 3,061,151     $ 2,916,455     $ 2,641,956
Finance revenue                              366,366         245,999         251,233
Other revenue                                297,261         252,249         214,604
                                         ------------    ------------    ------------
                                           3,724,778       3,414,703       3,107,793

COST OF SALES AND OPERATING EXPENSES
Cost of sales, including buying
  and occupancy expenses                   1,889,631       1,821,235       1,776,845
Selling, general and
  administrative expenses                  1,564,897       1,389,630       1,245,105
                                         ------------    ------------    ------------
                                           3,454,528       3,210,865       3,021,950

Operating income                             270,250         203,838          85,843
Interest expense                              74,226          66,711          67,733
                                         ------------    ------------    ------------
Earnings before income taxes                 196,024         137,127          18,110
Income tax expense                            71,130          51,797           6,305
                                         ------------    ------------    ------------
Earnings before redemption of
  subsidiary preferred stock                 124,894          85,330          11,805
Redemption of subsidiary
  preferred stock                                  -               -           8,535
Earnings before cumulative effect        ------------    ------------    ------------
  of accounting change                       124,894          85,330           3,270
Cumulative effect of accounting change
  (net of income tax benefit of $2,503)        4,076               -               -
                                         ------------    ------------    ------------
Net earnings                             $   120,818     $    85,330     $     3,270
                                         ============    ============    ============
EARNINGS PER COMMON SHARE
Earnings per common share before
  cumulative effect of accounting change
     Basic and diluted                   $      0.95     $      0.65     $      0.03

Cumulative effect of accounting change
     Basic and diluted                          0.03               -               -
                                         ------------    ------------    ------------
Net earnings per common share
     Basic and diluted                   $      0.92     $      0.65     $      0.03
                                         ============    ============    ============
Weighted average common shares
  outstanding
     Basic                               131,861,808     131,813,183     128,656,398
                                         ============    ============    ============
     Diluted                             131,944,900     131,990,542     128,657,563
                                         ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       20
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
For years ended ($000s omitted)
<TABLE>
<CAPTION>
                                              December 30,      January 1,       January 2,
                                                 2000             2000             1999
                                             -------------    --------------    -------------
<S>                                          <C>              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings                                 $    120,818     $     85,330      $     3,270
Adjustments to reconcile net earnings
 to net cash provided by (used in)
 operating activities:
  Cumulative effect of accounting change            4,076                -                -
  Depreciation and amortization                    78,235           94,683           88,547
  Net pretax gains on sale of receivables         (70,974)         (15,760)         (45,328)
  Deferred income taxes                            17,820           42,252            4,687
Change in assets and liabilities:
    (Increase) decrease in receivables, net       (71,392)        (411,660)          64,558
    (Increase) decrease in inventories            (64,098)          (8,498)          17,841
    Increase in prepaid expenses                   (7,337)          (8,525)          (4,253)
    Increase in accounts payable
      and accrued liabilities                     164,602           66,918           43,215
    Increase (decrease) in income taxes            30,467            6,067           (3,833)
                                              ------------     ------------     ------------
Net cash provided by (used in)
  operating activities                            202,217         (149,193)         168,704
                                              ------------     ------------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to property and equipment           (65,771)         (38,484)         (28,610)
Net (additions to) reductions in other assets     (36,729)         (32,329)          43,027
                                              ------------     ------------     ------------
Net cash provided by (used in)
  investing activities                           (102,500)         (70,813)          14,417
                                              ------------     ------------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of debt                                  228,000          258,000           25,000
Payment of debt                                  (214,465)         (85,714)        (232,900)
Payment of dividends                              (15,822)               -                -
Issuance of Class A common shares                      37              596              466
Issuance of Class B common shares                       -                -           69,993
                                              ------------     ------------     ------------
Net cash provided by (used in)
  financing activities                             (2,250)         172,882         (137,441)
                                              ------------     ------------     ------------
Effect of exchange rate changes on cash               332            1,947           (2,062)
                                              ------------     ------------     ------------
Net change in cash and cash equivalents            97,799          (45,177)          43,618
Cash and cash equivalents at
  beginning of year                                46,023           91,200           47,582
Cash and cash equivalents at                  ------------     ------------     ------------
  end of year                                 $   143,822      $    46,023      $    91,200
                                              ============     ============     ============

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:

    Interest                                  $    73,622      $    68,414      $    68,973
                                              ------------     ------------     ------------
    Income taxes                              $    29,868      $     4,764      $     5,631
                                              ------------     ------------     ------------
</TABLE>

See accompanying notes to consolidated financial statements.


                                       21
<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
($000s omitted)

<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                               Class A         Class B   Additional                            other
                                            non-voting          voting      paid-in       Retained     comprehensive
                                Total     common stock    common stock      capital       earnings              loss
                             ---------    -------------   ------------   ----------      ---------     -------------
<S>                          <C>          <C>             <C>            <C>             <C>           <C>
BALANCES AT
  JANUARY 3, 1998            $ 565,600       $  14,660      $ 103,483     $ 271,645      $ 178,305      $  (2,493)
Comprehensive income
 Net earnings                    3,270             -              -             -            3,270            -
 Foreign currency
  translation                   (2,062)            -              -             -              -           (2,062)
                             ---------
Total comprehensive income       1,208
Issuance of 87,380
  Class A common shares            466              88            -             378            -              -
Issuance of 13,526,571
  Class B common shares         69,993             -           13,527        56,466            -              -
                             ---------       ---------      ---------     ---------      ---------      ---------
BALANCES AT
  JANUARY 2, 1999              637,267          14,748        117,010       328,489        181,575         (4,555)
Comprehensive income
 Net earnings                   85,330             -              -             -           85,330            -
 Foreign currency
  translation                    1,947             -              -             -              -            1,947
                             ---------
Total comprehensive income      87,277
Issuance of 101,400
  Class A common shares            596             101            -             495            -              -
                             ---------       ---------      ---------     ---------      ---------      ---------
BALANCES AT
  JANUARY 1, 2000              725,140          14,849        117,010       328,984        266,905         (2,608)
Comprehensive income
 Net earnings                  120,818             -              -             -          120,818            -
 Foreign currency
  translation                   (2,691)            -              -             -              -           (2,691)
                             ---------
Total comprehensive income     118,127
Dividends paid                 (15,822)            -              -             -          (15,822)           -
Issuance of 6,000
  Class A common shares             37               6            -              31            -              -
                             ---------       ---------      ---------     ---------      ---------      ---------
BALANCES AT
  DECEMBER 30, 2000          $ 827,482       $  14,855      $ 117,010     $ 329,015      $ 371,901      $  (5,299)
                             =========       =========      =========     =========      =========      =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       22
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($000s omitted, except per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Spiegel, Inc. and its subsidiaries are referred to throughout this report as
"The Spiegel Group," "the Group" or "the Company." The Spiegel Group is a
leading international specialty retailer marketing fashionable apparel and home
furnishings through catalogs, eight e-commerce sites and 598 specialty retail
and outlet stores. The Company operates a special-purpose bank that offers
private-label FCNB Preferred credit programs to customers of its merchant
divisions and markets various bankcard credit programs nationwide.

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 in the financial statements and accompanying
notes. 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. All significant intercompany transactions
and accounts have been eliminated in consolidation. The Company's joint
venture investments in Germany and Japan with affiliated companies of Otto
Versand, a related party, are accounted for using the equity method as they
are less than 50 percent owned. The operating results of these entities are
not material to the Company. In 1999, a $5,000 charge was recorded
representing the Company's proportionate share of the costs to discontinue a
joint venture in the United Kingdom.

FISCAL YEAR

The Company's fiscal year ends on the Saturday closest to December 31. Fiscal
years 2000, 1999 and 1998 consisted of 52 weeks and ended on December 30,
2000, January 1, 2000 and January 2, 1999, respectively.

MERCHANDISING REVENUE RECOGNITION

The Company records revenue at the point of sale for retail stores and at the
time of shipment for catalog and e-commerce sales. Membership fee revenue
related to discount clubs offered to merchandise customers is recognized in
net sales over the term of the membership, which is 12 months. The Company
provides for returns at the time of sale based upon projected merchandise
returns or membership fee refunds. Amounts billed to customers for catalog
and e-commerce shipping and handling are recorded as other revenue at the
time of shipment.

FINANCE REVENUE RECOGNITION

Finance charge and fee revenue on credit card receivables owned is recorded
as income when earned. Excess cash flows resulting from the Company's
securitization activity are recorded as finance revenue when earned. Annual
credit card fees are recognized as finance revenue over a 12-month period.
Gains recognized on the sale of credit card receivables are recorded as
finance revenue.

SHIPPING AND HANDLING COSTS

Shipping and handling costs incurred related to the movement, preparation and
shipment of products, including certain overhead costs, are classified as
selling, general and administrative expense. Shipping and handling expense
was $240,035, $217,910 and $199,115 in 2000, 1999 and 1998, respectively.
Occupancy costs related to distribution facilities are classified as cost of
sales.

CASH AND CASH EQUIVALENTS

Cash equivalents represent short-term, highly liquid investments with
original maturities of three months or less.

                                       23
<PAGE>

RECEIVABLES

Receivables consist primarily of FCNB Preferred credit card receivables
generated in connection with the sale of the Company's merchandise as well as
receivable balances generated from the bankcard credit programs offered by
the Company's special-purpose bank. The Company's customer base is diverse in
terms of both geographic and demographic coverage. At December 30, 2000,
credit card receivables serviced were $3,323,505, of which 66 percent related
to the Company's FCNB Preferred credit programs. The allowance for doubtful
accounts is based upon management's evaluation of the collectability 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.

SALE OF RECEIVABLES

The majority of the Company's credit card receivables are transferred to
trusts that, in turn, sell certificates and notes representing undivided
interests in the trusts to investors. The receivables are sold without
recourse. Accordingly, no allowance for doubtful accounts related to the sold
receivables is maintained by the Company. When the Company sells receivables
in these securitizations, it retains interest-only strips, subordinated
certificates, receivables and cash reserve accounts, all of which are
included in retained interests in securitized receivables. Recognition of
gain or loss on the sale of receivables depends in part on the previous
carrying amount of the financial assets involved in the transfer, allocated
between the assets sold and the retained interests based on their relative
fair value at the date of transfer.

Cash reserve accounts are maintained as necessary, representing reserve funds
used as credit enhancement for specific classes of investor certificates
issued in certain securitization transactions. The discounted value of these
funds was included in other assets and totaled $5,391 and $10,192 at December
30, 2000 and January 1, 2000, respectively.

Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," supercedes SFAS No. 125. SFAS No. 140 establishes new
conditions for an entity to be a qualifying special-purpose entity and
clarifies under what conditions a transferor has retained effective control
over transferred assets. The updated rules for transfers of financial assets
are effective for transfers occurring after March 31, 2001 and generally do
not affect the accounting for previous transfers. Early adoption of the new
rules is not allowed. The Company does not expect adoption of SFAS No. 140 to
have a material effect on its consolidated results of operations or financial
position.

MARKETABLE SECURITIES

Marketable securities consist of the retained certificates issued by the
trusts in conjunction with the securitization of the Company's credit card
receivables. These debt securities, classified as trading and stated at fair
market value, are included in net receivables.

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,
2000 and January 1, 2000 were $48,433 and $40,615, respectively, and are
included in prepaid expenses. All other advertising costs for catalog,
e-commerce, retail and credit operations are expensed as incurred. Total
advertising expense, including the above mentioned catalog costs, was
$499,373, $422,057 and $393,525 in 2000, 1999 and 1998, respectively.

STORE PRE-OPENING COSTS

Pre-opening costs for new stores are charged to operations as incurred.

                                       24
<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.
Depreciable lives range from five to 40 years for buildings and improvements
and three to 10 years for equipment, furniture and fixtures. Leasehold
improvements are amortized over the lesser of the term of the lease or asset
life.

LONG-LIVED ASSETS

The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. An impairment loss is recognized when estimated future
cash flows expected to result from use of the assets are less than the
carrying amount. Impairment losses resulting from these reviews have not been
significant.

INTANGIBLE ASSETS

Intangible assets represent principally trademarks and the excess of cost
over the fair market value of net assets of businesses acquired (goodwill).
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 $84,479 and $78,966 at December 30,
2000 and January 1, 2000, 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 cash flows. The Company does not believe there
has been any material impairment in the carrying value of its goodwill and
trademarks.

FOREIGN CURRENCY TRANSLATION

The financial statements of the Company's Canadian subsidiary and
international joint ventures are translated into U.S. dollars using the
exchange rate in effect at the end of the fiscal year for assets and
liabilities and at the average exchange rates in effect during the period for
results of operations and cash flows. The related unrealized gains or losses
resulting from translation are reflected as a component of accumulated other
comprehensive income in stockholders' equity. Foreign currency transaction
gains and losses are included in the consolidated statements of earnings as
incurred.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company selectively uses non-leveraged, off-balance-sheet derivative
instruments primarily to manage its market and interest-rate risk, and does
not hold derivative positions for trading purposes. Current derivative
positions consist of non-leveraged, off-balance-sheet interest rate swaps
that are accounted for by recording the net interest paid as interest expense
on a current basis. The Company also uses foreign currency forward contracts
to manage foreign exchange rate risk related to specific transactions with
its international joint venture operations. The change in fair value of these
short-term forward contracts is recognized in income when the related foreign
currency transaction occurs and is not considered significant.

Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," and No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities," establish
accounting and reporting standards for derivatives and for hedging
activities. Due to its limited use of derivative instruments, the Company
does not expect the adoption of the above standards to have a material effect
on the consolidated results of operations or financial position. The Company
will adopt SFAS No. 133 and SFAS No. 138, as required, in fiscal year 2001.

                                       25
<PAGE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

Due to the revolving nature of the credit card portfolios, 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.

In the absence of quoted market prices for retained interests in credit card
securitizations, the Company estimates the fair value based on the present
value of the future expected cash flows. These future cash flows consist of
an estimate of the excess of finance charges and fees over the sum of the
interest paid to certificate holders, contractual servicing fees and
charge-offs, and also include the estimated future finance charges and
principal collections related to interests in the credit card receivables
retained by the Company. These estimates are calculated utilizing the current
performance trends of the receivables portfolios, combined with management's
best estimates of the key assumptions: portfolio yield, charge-offs,
liquidation rates, interest rates and discount rates commensurate with the
risks involved. Certain estimates inherent in determining the present value
of these estimated future cash flows are influenced by factors outside the
Company's control and, as a result, could materially change in the near term.

The carrying amounts of other financial assets and liabilities approximates
fair value due to the short-term maturities of these assets and liabilities.
The fair value of long-term debt and related derivative financial instruments
is discussed in Note 7.

SYSTEMS DEVELOPMENT COSTS

Significant systems development costs are capitalized and amortized on a
straight-line basis over the useful life of the asset, not to exceed
three-years. Costs, net of accumulated amortization, included in other assets
as of December 30, 2000 and January 1, 2000 were $37,166 and $29,201,
respectively. Related amortization expense recognized in 2000, 1999 and 1998
was $12,400, $12,856 and $11,223, respectively.

CREDIT CARD ACCOUNT ACQUISITION EXPENSES

Credit card account acquisition expenses are deferred and recognized in
selling, general and administrative expense on a straight-line basis over a
12-month period.

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).

STOCK-BASED COMPENSATION

The Company has elected to account for stock-based compensation using the
intrinsic value method as discussed in Note 8.

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. (SHI). Pursuant to a tax reimbursement
agreement with SHI, the Company records provisions for income tax expense as
if it were a separate taxpayer.

EARNINGS PER COMMON SHARE

Basic earnings per common share (EPS) is computed by dividing net earnings by
the weighted average number of both classes of common shares outstanding
during the year. Diluted EPS is computed in a manner consistent with that of
basic EPS while giving effect to all potentially dilutive employee stock
options that were outstanding during the period using the treasury stock
method.

The computation of diluted EPS excludes options to purchase 373,875, 350,570
and 1,151,575 shares of common stock that were outstanding at year-end 2000,
1999 and 1998, respectively, because the options' exercise prices were
greater than the average market price of the common shares.

                                       26
<PAGE>

RECLASSIFICATIONS

Certain prior year amounts have been reclassified from amounts previously
reported to conform with the 2000 presentation.

In response to Emerging Issues Task Force Issue No. 00-10, prior year amounts
have been adjusted to reflect the reclassification of shipping and handling
revenue from selling, general and administrative expense to other revenue.

2. ACCOUNTING PRINCIPLE CHANGE

In consideration of guidance issued by the Securities and Exchange Commission
under Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," the Company changed its revenue recognition policy for a
discount club membership program. Under the new accounting method, the
Company will defer recognition of membership fee revenue, offset with direct
costs that are incremental to the membership sale, over the 12-month term of
the membership. The Company recorded a non-cash charge of $4,076 (net of
income tax benefit of $2,503) for the cumulative effect of the accounting
change at the beginning of 2000. Net earnings in 2000 included a non-cash
charge of $561 (net of income tax benefit of $339) related to the accounting
change.

The Company's deferred revenue and refund liability related to the discount
club membership program are included in other liabilities. The following
table presents the deferred revenue and refund liability, as if the
accounting change had been in effect for each year:

<TABLE>
<CAPTION>
                                    2000         1999         1998
                                 --------     --------     --------
<S>                              <C>          <C>          <C>
Beginning of year                $ 9,090      $ 8,505      $ 8,055
Membership fees received          17,771       15,420       14,084
Membership fees recognized       (16,737)     (14,968)     (13,902)
Adjustment to refund liability      (124)         133          268
                                 --------     --------     --------
End of year                      $10,000      $ 9,090      $ 8,505
                                 ========     ========     ========
</TABLE>

3. RECEIVABLES

Receivables consist of the following:
<TABLE>
<CAPTION>
                                                       2000             1999
                                                   ------------     ------------
<S>                                                <C>              <C>
COMPOSITION OF CREDIT CARD RECEIVABLES:
Receivables serviced                               $ 3,323,505      $ 2,381,154
Receivables securitized                             (3,083,697)      (1,963,318)
                                                   ------------     ------------
Receivables with no certificates issued                239,808          417,836
                                                   ------------     ------------
COMPOSITION OF RECEIVABLES, NET:
Receivables with no certificates issued                239,808          417,836
Retained subordinated interests,
   at fair value                                       563,695          323,337
                                                   ------------     ------------
Receivables owned                                      803,503          741,173

Interest-only strips                                   227,812          156,229
Less allowance for returns on FCNB Preferred
  credit sales                                         (29,812)         (28,496)
Less allowance for doubtful accounts                   (14,364)         (23,738)
Other receivables, net                                 126,312          126,398
                                                   ------------     ------------
Receivables, net                                   $ 1,113,451      $   971,566
                                                   ============     ============
</TABLE>


                                       27
<PAGE>

4. SALE OF RECEIVABLES

The Company has established trusts for the purpose of routinely securitizing
credit card receivables. The Company retains interest-only strips, subordinated
investor certificates, receivables and cash reserve accounts resulting from
these securitizations. The Company also maintains responsibility for servicing
the securitized receivables and receives annual servicing fees of 2 percent of
all receivables transferred to the trusts. This servicing fee reflects the fair
market value for these servicing rights; accordingly, the Company does not
record servicing assets or liabilities. The investors and the securitization
trusts have no recourse to the Company's other assets for failure of credit card
debtors to meet payment obligations. Certain of the Company's retained interests
are subordinate to investors' interests. The value of the retained interests is
subject to credit, payment- and interest-rate risk on the transferred financial
assets.

Net pretax gains, including gains on the sale of credit card receivables and
adjustments to fair value of the Company's retained interests in securitized
receivables, were $70,974, $15,760 and $45,328 in 2000, 1999 and 1998,
respectively.

RETAINED INTERESTS
Retained interests in securitized receivables consist of the following:

<TABLE>
<CAPTION>
                                        2000         1999
                                   ----------   ----------
<S>                               <C>          <C>
Preferred:
Retained subordinated
   certificates and receivables    $ 448,693    $ 264,220
Interest-only strip                  142,585      113,629
Cash reserve accounts                  5,391       10,192
                                   ----------   ----------
Total retained interests in
   securitized receivables         $ 596,669    $ 388,041
                                   ==========   ==========

Bankcard:
Retained subordinated
   certificates and receivables    $ 115,002    $  59,117
Interest-only strip                   85,227       42,600
                                   ----------   ----------
Total retained interests in
   securitized receivables         $ 200,229    $ 101,717
                                   ==========   ==========
</TABLE>


                                       28
<PAGE>

Key economic assumptions used to value the retained interests resulting from the
securitization of credit card receivables were as follows (rates per annum):

<TABLE>
<CAPTION>
                                          2000            2000
                                  -------------    -------------
Key Assumptions                      Preferred        Bankcard
----------------                  -------------    -------------
<S>                               <C>              <C>
Liquidation Rates:
  Month 1                                 1.26%            9.37%
  Months 2-9(range for period)     3.34 - 5.90%     2.42 - 8.67%
  Months 10 through
   completed liquidation                  5.90%            9.41%
Weighted average life (in months)        14.17            10.49
Expected charge-offs                     12.18%           10.60%
Servicing fee                             2.00%            2.00%
Discount rate                            15.00%           13.00%
Weighted average interest rate
  paid to investors                       6.54%            6.35%
Implied interest rate on
  non-interest-bearing retained
  subordinated interests                  9.00%            8.00%
                                   -----------------------------
</TABLE>


SECURITIZATION STRUCTURE
The asset-backed certificates and notes have been issued at either floating
rates or at fixed rates. Amounts securitized by rate-type at original issue were
as follows:
<TABLE>
<CAPTION>
                                        2000             2000
                                    ------------     ------------
Rate Type                             Preferred         Bankcard
----------                          ------------     ------------
<S>                                 <C>              <C>
Floating rates                      $ 1,076,002      $   594,000
Fixed rates                             600,000          250,000
Zero coupon retained certificates       448,693          115,002
                                    ------------     ------------
Receivables securitized             $ 2,124,695      $   959,002
                                    ============     ============
</TABLE>

In certain transactions the securitization trusts have entered into interest
rate swap arrangements to convert floating rate certificates to fixed rate
certificates.


                                       29
<PAGE>

SENSITIVITY ANALYSIS
At December 30, 2000, key economic assumptions and the sensitivity of the
current fair value of residual cash flows to immediate 10 percent and 20 percent
adverse changes in those assumptions are as follows:

<TABLE>
<CAPTION>
                                                  Preferred       Bankcard
                                                 -----------     ----------
<S>                                              <C>             <C>
Fair value of retained interests                 $  596,669      $ 200,229
Weighted-average life (in months)                     14.17          10.49
LIQUIDATION RATE ASSUMPTIONS (1)
  Impact on fair value of 10% adverse change     $   (7,874)     $  (5,783)
  Impact on fair value of 20% adverse change     $  (14,799)     $ (10,813)

EXPECTED CHARGE-OFFS (ANNUAL RATE)                    12.18%         10.60%
  Impact on fair value of 10% adverse change     $  (31,542)     $  (9,430)
  Impact on fair value of 20% adverse change     $  (62,300)     $ (18,704)

RESIDUAL CASH FLOWS DISCOUNT RATE (ANNUAL RATE)       15.00%         13.00%
  Impact on fair value of 10% adverse change     $   (3,001)     $    (971)
  Impact on fair value of 20% adverse change     $   (5,912)     $  (1,923)

WEIGHTED AVERAGE INTEREST PAID TO INVESTORS            6.54%          6.35%
  Impact on fair value of 10% adverse change     $   (8,263)     $  (3,364)
  Impact on fair value of 20% adverse change     $  (16,526)     $  (6,728)
                                                 --------------------------
</TABLE>
(1)      See preceding key assumptions table.

These sensitivities are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10 percent variation in
assumptions generally cannot be extrapolated because the relationship of the
change in assumption to the change in fair value may not be linear. Also, in
this table, the effect of a variation in a particular assumption on the fair
value of the retained interest is calculated without changing any other
assumption. In reality, changes in one factor may result in changes in another
(for example, increases in market interest rates may lower liquidation rates and
increase charge-offs), which might magnify or counteract the sensitivities.

CASH FLOWS FROM SECURITIZATIONS

Cash flows received from securitization trusts during 2000 were as follows:

<TABLE>
<CAPTION>
                                     Preferred       Bankcard          Total
                                    -----------     -----------     -----------
<S>                                 <C>             <C>             <C>
Proceeds from new securitizations
  and gross proceeds from sale of
  certificates and notes            $1,309,200      $  574,000      $1,883,200
Proceeds from collections
 reinvested in previous
 credit card securitizations           847,962         984,076       1,832,038
Servicing fees received                 34,019          13,802          47,821
Other cash flows received
 on retained interests              $  228,158      $  119,580      $  347,738
                                    -----------     -----------     -----------
</TABLE>

Other cash flows represents the total cash flows received from retained
interests by the transferor other than servicing fees. Other cash flows include,
for example, all cash flows from interest-only strips and cash above the minimum
required level in cash collateral accounts.


                                       30
<PAGE>

CHARGE-OFFS

Actual and projected charge-offs are as follows:
<TABLE>
<CAPTION>
Year              Preferred       Bankcard
------------     -----------     ----------
<S>                   <C>            <C>
Projected:
2001                  12.2%          10.6%
Historical:
2000                   9.3%          10.1%
1999                   7.9%          11.8%
1998                   9.2%           9.9%
</TABLE>

Historical loss and delinquency amounts for the managed portfolio at December
30, 2000:

<TABLE>
<CAPTION>
                                       Preferred          Bankcard
                                      ------------      ------------
<S>                                   <C>               <C>
COMPOSITION OF RECEIVABLES SERVICED:
Principal balances                    $ 2,108,302       $ 1,096,790
Accrued finance charges and fees           71,925            46,488
                                      ------------      ------------
Receivables serviced                    2,180,227         1,143,278
                                      ------------      ------------
COMPOSITION OF RECEIVABLES HELD
  IN TRUSTS:
Receivables sold to investors           1,676,002           844,000
Retained certificates                     448,693           115,002
Receivables owned and held in trusts        5,791           148,290
                                      ------------      ------------
Receivables held in trusts              2,130,486         1,107,292
                                      ------------      ------------
Receivables held in portfolio         $    49,741       $    35,986
                                      ============      ============

Receivables >60 days past due         $   191,590       $    78,607

Net charge-offs                       $   170,559       $    86,711
                                      ------------      ------------
</TABLE>

Certain restrictions exist related to securitization transactions that protect
certificate holders against declining performance of the credit card
receivables. In the event performance declines outside stated parameters and
waivers are not granted by certificate holders, note holders and/or credit
enhancement providers, a rapid amortization of the certificates could
potentially occur. At December 30, 2000, the credit card receivables were
performing within established guidelines.

5. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                          2000              1999
                                                       ----------        ----------
<S>                                                    <C>               <C>
Land                                                   $  19,790         $  19,450
Buildings and improvements                               153,340           146,819
Equipment, furniture and fixtures                        280,039           256,988
Leasehold improvements                                   177,710           170,751
                                                       ----------        ----------
                                                         630,879           594,008
Less accumulated depreciation and amortization          (312,037)         (282,781)
                                                       ----------        ----------
                                                         318,842           311,227
Construction in process                                   28,715            22,625
                                                       ----------        ----------
Property and equipment, net                            $ 347,557         $ 333,852
                                                       ==========        ==========
</TABLE>


                                       31
<PAGE>

6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                          2000              1999
                                                       ----------        ----------
<S>                                                    <C>               <C>
Trade payables                                         $ 258,804         $ 225,859
Deposits                                                 190,906            79,475
Gift certificates and
  other customer credits                                  54,067            49,183
Salaries, wages and employee benefits                    110,254            91,377
General taxes                                             72,205            87,413
Allowance for future returns                              35,334            34,525
Other liabilities                                         91,983            76,623
                                                       ----------        ----------
Total accounts payable and accrued liabilities         $ 813,553         $ 644,455
                                                       ==========        ==========
</TABLE>

Deposits represent jumbo certificates of deposit issued by First Consumers
National Bank, the Company's special-purpose bank, and include secured credit
card customer deposits.

7. DEBT

The following is a summary of the Company's debt:

<TABLE>
<CAPTION>
                                                         2000                1999
                                                      ----------         -----------
<S>                                                  <C>                 <C>
NOTES PAYABLE:
Revolving credit agreement                           $  286,000          $  258,000
Term loan agreements, 6.95% to 8.81%,
  due March 17, 2001 through July 31, 2007              448,571             334,286
Subordinated notes,
  paid June 30, 2000                                          -             128,750
Secured notes, 7.25% to 7.35%,
  due November 15, 2001 through
  November 15, 2005                                      60,000              60,000
                                                      ----------         -----------
  Total debt                                            794,571             781,036
Less current maturities of debt                        (107,714)           (214,464)
                                                     -----------         -----------
Total debt, excluding current maturities             $  686,857          $  566,572
                                                     ===========         ===========
</TABLE>

The Company has a $750,000 revolving credit agreement with a group of banks. The
commitment is comprised of two components, including a $600,000 long-term
agreement maturing in July 2003 and a $150,000 364-day agreement maturing in
June 2001. Fees are variable and are based on the total commitment. Commitment
fees totaled $1,295, $1,678 and $1,902 in 2000, 1999 and 1998, respectively.
Borrowings under this commitment averaged $386,805 with a maximum of $716,000
during 2000. The effective annual interest rate was 7.42 percent in 2000,
excluding the previously mentioned commitment fees.

Interest rate swap contracts are used selectively to hedge the underlying
interest risks on various term loans. At December 30, 2000, these interest rate
swap agreements had effective and termination dates from March 1995 to March
2005. The notional principal amounts of these agreements totaled $58,571 and
$64,286 at the end of 2000 and 1999, respectively. At December 30, 2000 and
January 1, 2000, the fair value of these swap agreements was $2,805 and $1,414,
respectively. These values were obtained from financial institutions and
represent the estimated amount the Company would pay to terminate the
agreements, taking into consideration current interest rates and risks of the
transactions. 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 increased interest expense by $715, $1,194 and
$1,264 in 2000, 1999 and 1998, respectively.


                                       32
<PAGE>

Additionally, the Company has letter of credit facilities to support the
purchase of inventories. Letter of credit commitments outstanding were $94,800
and $84,064 at December 30, 2000 and January 1, 2000, respectively. At December
30, 2000, there was an additional $55,500 of commitments available for the
issuance of letters of credit. The Company also had available undrawn standby
letter of credit facilities at December 30, 2000, totaling approximately $3,656
to support certain leasing arrangements.

The fair value of the Company's total debt, based upon the discounting of future
cash flows using the Company's borrowing rate for loans of comparable maturity,
was approximately $814,231 at December 30, 2000.

Certain credit agreements have restrictive covenants, including limitations on
the payment of dividends. At December 30, 2000, the Company was in compliance
with such covenants.

Aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
           Fiscal Year                                  Amount
           -----------                               ----------
           <S>                                       <C>
           2001                                      $ 107,714
           2002                                         68,714
           2003                                        363,214
           2004                                         54,714
           2005                                        144,715
           and thereafter                               55,500
                                                     ----------
           Total debt                                $ 794,571
                                                     ==========
</TABLE>

8. EMPLOYEE BENEFIT PLANS

STOCK OPTION PLAN

The Spiegel, Inc. Salaried Employee Incentive Stock Option Plan, established
in 1998 to replace an expiring plan, provides for the issuance of options to
purchase up to 1,000,000 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 vest at the rate of 20 percent per year and expire 10
years after issuance. At December 30, 2000, options outstanding under the
current plan and the expired plan were 614,000 and 484,080, respectively. The
Company also has a non-qualified stock option plan in place for certain
former employees. Options are transferred from the qualified plan to the
non-qualified plan 90 days after the date of separation. Options outstanding
under the non-qualified plan were 315,000 at December 30, 2000. The following
presentations of total options outstanding include all aforementioned stock
option plans.

A summary of the changes in the options outstanding is as follows:
<TABLE>
<CAPTION>
                                                                       Average
                                             Shares       Amount        Price
                                            ----------   ----------   ----------
<S>                                         <C>          <C>          <C>
Outstanding at January 3, 1998              1,383,700    $  11,427    $    8.26
  Granted                                     174,000        1,044         6.00
  Exercised                                   (87,380)        (466)        5.33
  Canceled                                   (266,860)      (2,264)        8.48
                                            ----------   ----------   ----------
Outstanding at January 2, 1999              1,203,460        9,741         8.09
  Granted                                     223,000        1,539         6.90
  Exercised                                  (101,400)        (596)        5.87
  Canceled                                   (118,980)      (1,121)        9.42
                                            ----------   ----------   ----------
Outstanding at January 1, 2000              1,206,080        9,563         7.93
  Granted                                     241,000        1,056         4.38
  Exercised                                    (6,000)         (38)        6.35
  Canceled                                    (28,000)        (198)        7.07
                                            ----------   ----------   ----------
OUTSTANDING AT DECEMBER 30, 2000            1,413,080    $  10,383    $    7.35
                                            ==========   ==========   ==========
</TABLE>

Total stock options authorized but unissued at December 30, 2000 were 385,600.


                                       33
<PAGE>

The following table summarizes information about options outstanding and
exercisable at December 30, 2000:

<TABLE>
<CAPTION>
                                  OPTIONS OUTSTANDING                  OPTIONS EXERCISABLE
                 -----------------------------------------------  -----------------------------
Range of                      Weighted Average
Exercise              Number         Remaining  Weighted Average       Number  Weighted Average
  Prices         Outstanding  Contractual Life    Exercise Price  Exercisable    Exercise Price
---------------- ------------ ----------------  ----------------  ------------ -----------------
<S>              <C>          <C>               <C>               <C>          <C>
$ 4.00 to $ 7.99  1,043,580      7.0 years          $ 5.98           373,080        $ 6.57
$ 8.00 to $11.99    324,000      1.7 years          $ 9.66           314,000        $ 9.65
$12.00 to $23.00     45,500      1.4 years          $22.25            45,500        $22.25
                 -----------                                       ----------
                  1,413,080      5.6 years          $ 7.35           732,580        $ 8.86
                 ===========                                       ==========
</TABLE>

The Company follows the disclosure provisions of SFAS No. 123. Accordingly, no
compensation expense has been recognized for the stock option activity. If
compensation expense had been determined based on the estimated fair value of
the options at the grant date as prescribed by SFAS No. 123, the proforma effect
on the Company's net income would have been a reduction of $170, $372 and $274
in 2000, 1999 and 1998, respectively. The fair value of each option granted is
estimated on the date of grant using the Black-Scholes option-pricing model. The
resulting compensation expense is amortized over the vesting period.

The option grant fair values and assumptions used to determine such values are
as follows:
<TABLE>
<CAPTION>
Options granted during                      2000       1999       1998
---------------------------                ------     ------     ------
<S>                                        <C>        <C>        <C>
Weighted average fair value
  at grant date                            $1.87      $3.66      $2.46
Assumptions:
  Risk free interest rate                   5.88%      6.42%      4.50%
  Expected dividend yield                   2.06%      1.58%      3.60%
  Expected volatility                      60.49%     63.14%     60.26%
  Expected term (in years)                     5          5          5
</TABLE>


                                       34
<PAGE>

RETIREMENT PLANS

The Company's retirement plans consist of noncontributory defined benefit
pension plans and contributory defined post-retirement benefit health care
and life insurance plans. The Company also sponsors a noncontributory
supplemental retirement program for certain executives and other defined
contribution plans, including 401(K) plans, a profit sharing plan and thrift
plans. In 1998, the Company recognized additional costs associated with the
curtailment of retirement plans, including special termination benefits, due
to the consolidation of certain operations. The cost of these programs and
the balances of plan assets and obligations are shown below:

<TABLE>
<CAPTION>
                                         Pension Benefits            Other Benefits
                                           2000      1999            2000      1999
ASSETS AND OBLIGATIONS                 --------  --------        --------  --------
<S>                                     <C>       <C>             <C>       <C>
CHANGE IN BENEFIT OBLIGATION:
Beginning of year                       $55,797   $59,038         $ 9,748   $ 9,909
Service cost                                190       253             351       422
Interest cost                             4,118     3,946             705       689
Actuarial gain                             (214)     (466)           (592)     (616)
Benefits paid                            (5,615)   (7,586)           (595)     (656)
Plan amendments                               -       612               -         -
                                        --------  --------        --------  --------
End of year                              54,276    55,797           9,617     9,748
                                        --------  --------        --------  --------
FAIR VALUE OF PLAN ASSETS:
Beginning of year                        61,352    61,430               -         -
Actual return on plan assets              5,609     7,508               -         -
Employer contributions                        -         -             595       656
Benefits paid                            (5,615)   (7,586)           (595)     (656)
                                        --------  --------        --------  --------
End of year                              61,346    61,352               -         -
                                        --------  --------        --------  --------
NET AMOUNT RECOGNIZED:
Funded Status                             7,070     5,555          (9,617)   (9,748)
Unrecognized net actuarial loss           5,789     6,354           1,139     2,118
Unrecognized transition obligation
  and prior service cost                    756     1,036            (845)   (1,131)
                                        --------  --------        --------  --------
Prepaid (accrued) benefit cost          $13,615   $12,945         $(9,323)  $(8,761)
                                        ========  ========        ========  ========
</TABLE>


                                       35
<PAGE>

<TABLE>
<CAPTION>
                                          2000         1999        1998
EXPENSE                                --------     --------    --------
<S>                                    <C>          <C>         <C>
PENSION:
Service cost                           $   190      $   253     $   358
Interest cost                            4,118        3,946       3,998
Expected return on plan assets          (5,282)      (5,289)     (5,379)
Amortization of transition obligation      212          212         212
Recognized net actuarial loss               24          489         204
Amortization of prior service cost          67            -           -
Loss due to curtailment                      -            -       1,957
                                       --------     --------    --------
Total pension (income) cost               (671)        (389)      1,350
                                       --------     --------    --------
HEALTH CARE AND LIFE INSURANCE:
Service cost                               351          422         439
Interest cost                              705          689         644
Recognized net actuarial loss               63          150          72
Amortization of prior service cost         (57)         (88)        (18)
                                       --------     --------    --------
Total health care and life insurance     1,062        1,173       1,137
                                       --------     --------    --------

Defined contribution plans              30,088       25,950      15,325
                                       --------     --------    --------
Total retirement plan expense          $30,479      $26,734     $17,812
                                       ========     ========    ========

ACTUARIAL ASSUMPTIONS

Expected return on plan assets               9%           9%          9%
Health care trend rate                       6%           7%          8%
Discount rate                             7.75%        7.75%          7%
</TABLE>

For measurement purposes, a 6 percent annual rate of increase in the per capita
cost of covered health care benefits (i.e., health care cost trend rate) was
assumed for 2000 and thereafter. Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care plans. A
one-percentage-point increase in assumed health care cost trend rates would
increase the accumulated post-retirement benefit obligation and related expense
by $422 and $77, respectively. A one-percentage-point decrease in assumed health
care cost trend rates would decrease the accumulated post-retirement benefit
obligation and related expense by $393 and $69, respectively.


                                       36
<PAGE>

9. COMMITMENTS AND CONTINGENCIES

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.

LEASE COMMITMENTS

The Company leases office facilities, distribution centers, retail store
space and data processing equipment. Lease terms are generally 10 years and
many contain renewal options. Many of the retail store leases provide for
minimum annual rentals plus additional rentals based upon percentages of
sales, which range from 3 percent to 5 percent. The Company also sublets
certain leased office space to unrelated third parties. Rent expense
consisted of the following:

<TABLE>
<CAPTION>
                                            2000        1999        1998
                                        ---------   ---------   ---------
<S>                                     <C>         <C>         <C>
Minimum rentals                         $150,430    $147,869    $139,798
Percentage rentals                           464       1,079       1,836
Less sublease income                      (4,757)     (3,680)       (569)
                                        ---------   ---------   ---------
Net rental expense                      $146,137    $145,268    $141,065
                                        =========   =========   =========
</TABLE>

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,
2000 are as follows:

<TABLE>
<CAPTION>
           Fiscal Year                                  Amount
           -----------                               ----------
           <S>                                       <C>
           2001                                      $ 134,491
           2002                                        119,323
           2003                                        112,351
           2004                                        103,112
           2005                                         91,212
           and thereafter                              304,149
                                                    ----------
           Total minimum lease payments                864,638
           Less minimum sublease income                (35,860)
                                                    ----------
           Net minimum lease payments                $ 828,778
                                                    ==========
</TABLE>


                                       37
<PAGE>

10. INCOME TAXES

Earnings before income taxes is composed of the following:

<TABLE>
<CAPTION>
                       2000           1999           1998
                   ----------     ----------     ----------
<S>                <C>            <C>            <C>
Domestic           $ 195,028      $ 137,201      $  19,247
Foreign                  996            (74)        (1,137)
                   ----------     ----------     ----------
Total              $ 196,024      $ 137,127      $  18,110
                   ==========     ==========     ==========
</TABLE>


The components of income tax expense are as follows:

<TABLE>
<CAPTION>
                      2000           1999            1998
                  ---------      ---------      ----------
<S>               <C>            <C>            <C>
CURRENT:
  Federal         $ 41,722       $  7,028       $   4,247
  State              8,652          2,277          (1,536)
  Foreign              347            240          (1,092)
                  ---------      ---------       ---------
Total current       50,721          9,545           1,619
                  ---------      ---------       ---------
DEFERRED:

  Federal           19,191         38,867           7,275
  State              1,348          3,620          (3,197)
  Foreign             (130)          (235)            608
                  ---------      ---------       ---------
Total deferred      20,409         42,252           4,686
                  ---------      ---------       ---------
                  $ 71,130       $ 51,797        $  6,305
                  =========      =========       =========
</TABLE>


The differences between the provision for income taxes at the statutory rate and
the amounts shown in the consolidated statements of earnings are as follows:

<TABLE>
<CAPTION>
                                      2000                1999                 1998
                                Amount  Percent     Amount  Percent     Amount   Percent
                              --------- --------  --------- --------  --------- ---------
<S>                           <C>       <C>       <C>       <C>       <C>       <C>
Statutory rate                $ 68,608     35.0%  $ 47,994     35.0%   $ 6,339      35.0%
State income tax (net of
  federal income tax benefit)    1,819      1.0      3,475      2.5         91       0.5
Amortization of nondeductible
 goodwill and other items        1,452      0.7      1,179      0.9      1,031       5.7
Changes in estimates of
  previously provided taxes          -        -          -        -       (756)     (4.2)
Tax credits                       (749)    (0.4)      (851)    (0.6)      (400)     (2.2)
                              --------- --------  --------- --------  --------- ---------
Effective tax rate            $ 71,130     36.3%  $ 51,797     37.8%   $ 6,305      34.8%
                              ========= ========  ========= ========   ========  ========
</TABLE>


                                       38
<PAGE>

Significant components of the Company's deferred tax assets and liabilities are
as follows:

<TABLE>
<CAPTION>
                                                  2000           1999
                                              ---------      ---------
<S>                                          <C>            <C>
DEFERRED TAX ASSETS:
  Allowance for doubtful accounts            $  17,332      $  10,270
  Allowance for the gross profit
    on estimated future returns                 13,191         12,681
  Reserve for separations                        3,931          4,196
  Accruals for compensated absences              5,309          4,197
  Reserve for self insurance                     1,275          1,423
  Reserve for inventory losses                  16,753         10,156
  Post-retirement benefit obligation             3,838          3,537
  Capitalized overhead in inventory              1,809          3,610
  Other                                          5,470          6,307
                                              ---------      ---------
                                                68,908         56,377
                                              ---------      ---------
DEFERRED TAX LIABILITIES:
  Property and equipment                        35,360         32,435
  Prepaid and deferred expenses                  4,567          6,861
  Interest-only strips                          83,080         57,320
  Earned but unbilled finance charges            7,736          4,647
  Deferred rent obligation                       6,083          5,126
                                              ---------      ---------
                                               136,826        106,389
                                              ---------      ---------
Net deferred tax liabilities                 $  67,918      $  50,012
                                              =========      =========
</TABLE>

Management believes that realization of the deferred tax assets through future
taxable earnings or alternative tax strategies is more likely than not.

11. STOCKHOLDERS' EQUITY

In April 2000, the Company resumed quarterly dividend payments of $0.04 per
share.

In 1998, the Company issued 13,526,571 shares of Class B voting common stock to
its majority shareholder, Spiegel Holdings, Inc. The net proceeds of $69,993
were used primarily to fund working capital and investing needs.

12. SUBSIDIARY PREFERRED STOCK

In March 1994 and December 1995, Newport News issued shares of non-voting
redeemable preferred stock to certain directors and executive officers of the
Company, its subsidiaries and Otto Versand. All outstanding shares were redeemed
in April 1998 for $12,236. The excess of the redemption price over the carrying
value of the preferred stock reduced net earnings by $8,535 and the related
basic and diluted net earnings per common share by $0.06.


                                       39
<PAGE>

13. SEGMENT REPORTING

Management reviews results of operations before the impact of interest and
income taxes. The Company segregates its operations for this review based on
products and services offered and includes a merchandising segment and a
bankcard segment. Substantially all of the Company's operations are in the
United States, with a small Eddie Bauer retail operation in Canada.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. All intersegment transactions are
accounted for as if with a third party. All expenses for support functions are
allocated to each segment based on an equitable division of costs.

The merchandising segment is an aggregation of Eddie Bauer, Newport News and
Spiegel. These divisions offer apparel, home furnishings and other merchandise
through catalogs, e-commerce sites and retail stores. The merchandising segment
also includes the results of the FCNB Preferred credit programs, which provide
private-label credit services to customers of the merchant divisions.

The bankcard segment represents the bankcard operations of First Consumers
National Bank, the Company's special-purpose bank.


                                       40
<PAGE>

BUSINESS SEGMENT COMPARISONS

<TABLE>
<CAPTION>
                                                 2000            1999             1998
                                         -------------   -------------    -------------
<S>                                      <C>             <C>              <C>
REVENUE:
  Merchandising                          $  3,545,006     $ 3,333,830      $ 2,994,593
  Bankcard                                    179,772          80,873          113,200
                                         -------------   -------------    -------------
Total revenue                            $  3,724,778     $ 3,414,703      $ 3,107,793
                                         -------------   -------------    -------------
OPERATING INCOME:
  Merchandising                          $    179,291     $   189,960      $    21,601
  Bankcard                                     96,366          21,242           70,344
                                         -------------   -------------    -------------
Total segment operating income                275,657         211,202           91,945
Premium on acquisitions                        (5,407)         (7,364)          (6,102)
                                         -------------   -------------    -------------
Total operating income                        270,250         203,838           85,843
Interest expense                               74,226          66,711           67,733
                                         -------------   -------------    -------------
Earnings before income taxes             $    196,024     $   137,127      $    18,110
                                         =============   =============    =============

ASSETS:

  Merchandising                          $  1,904,952     $ 1,769,333      $ 1,527,024
  Bankcard                                    527,934         317,166          167,331
  Premium on acquisitions                     150,133         155,541          162,905
                                         -------------   -------------    -------------
Total assets                             $  2,583,019     $ 2,242,040      $ 1,857,260
                                         =============   =============    =============

NET PRETAX GAINS ON THE SALE OF
 RECEIVABLES:

  Merchandising                          $     28,347     $    18,918      $    11,757
  Bankcard                                     42,627          (3,158)          33,571
                                         -------------   -------------    -------------
Total net pretax gains on the sale of
 receivables                             $     70,974     $    15,760      $    45,328
                                          =============   =============    =============

DEPRECIATION AND AMORTIZATION:
  Merchandising                          $     70,379     $    85,429      $    80,896
  Bankcard                                      2,449           1,890            1,549
  Premium on acquisitions                       5,407           7,364            6,102
                                         -------------   -------------    -------------
Total depreciation and amortization      $     78,235     $    94,683      $    88,547
                                         =============   =============    =============

NET ADDITIONS TO PROPERTY AND EQUIPMENT:
  Merchandising                          $     63,862     $    33,789      $    22,414
  Bankcard                                      1,909           4,695              196
                                         -------------   -------------    -------------
Total net additions to property
  and equipment                          $     65,771     $    38,484      $    28,610
                                         =============   =============    =============
</TABLE>


                                       41
<PAGE>

STATEMENT OF MANAGEMENT RESPONSIBILITY

We have prepared the accompanying consolidated financial statements and related
information for the fiscal years 2000, 1999 and 1998. The opinion of the
Company's independent auditors, KPMG 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 accounting principles generally
accepted in the United States of America and 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 audit department
to review the adequacy, application and compliance of the internal control
structure.

KPMG LLP, an independent auditing firm, has been engaged to audit the
consolidated financial statements and to render an opinion as to their
conformity with accounting principles generally accepted in the United States of
America. They conducted their audit in accordance with auditing standards
generally accepted in the United States of America. 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 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, Inc. or its subsidiaries, which meets periodically with both management
and the independent auditors to ensure that each is carrying out its
responsibilities. KPMG LLP and the internal audit department have free access to
the audit committee, with and without the presence of management.


                                       42
<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, 2000 and January 1, 2000, 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, 2000. 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 auditing standards generally accepted
in the United States of America. 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, 20000 and January 1, 2000, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 30, 2000 in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of recording revenue for discount club memberships.

/s/ KPMG LLP

Chicago, Illinois
February 14, 2001


                                       43
<PAGE>

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

<TABLE>
<CAPTION>
2000                          First          Second           Third          Fourth     Total Year
---------------------   ------------    ------------    ------------    ------------   ------------
<S>                     <C>             <C>             <C>             <C>            <C>
Net sales and
 other revenues (1)     $   770,371     $   869,731     $   810,600     $ 1,274,076    $ 3,724,778
Operating income             46,545          56,575          43,573         123,557        270,250
Earnings before
  cumulative effect
  of accounting change       20,216          25,840          13,471          65,367        124,894
Cumulative effect of
  accounting change
  (net of income tax
   benefit of $2,503)         4,076               -               -               -          4,076
Net earnings            $    16,140     $    25,840     $    13,471     $    65,367    $   120,818
Earnings per share
  before cumulative
  effect of
  accounting change
   Basic and diluted    $      0.15     $      0.20     $      0.10     $      0.50    $      0.95
Cumulative effect of
  accounting change
   Basic and diluted           0.03               -               -               -           0.03
Net earnings per
  common share
   Basic and diluted    $      0.12     $      0.20     $      0.10     $      0.50    $      0.92
Weighted average
  common shares
  outstanding
    Basic               131,859,113     131,859,388     131,864,113     131,864,618    131,861,808
    Diluted             131,985,828     131,981,831     131,974,593     131,886,357    131,944,900
MARKET PRICE DATA
  High                  $      9.50     $      9.06     $      8.75     $      7.81    $      9.50
  Low                   $      6.31     $      6.00     $      6.50     $      3.03    $      3.03

<CAPTION>

1999                          First          Second           Third          Fourth     Total Year
---------------------   ------------    ------------    ------------    ------------   ------------
<S>                     <C>             <C>             <C>             <C>             <C>
Net sales and
 other revenues (1)     $   667,199     $   803,689     $   752,272     $ 1,191,543    $ 3,414,703
Operating income (loss)      (2,728)         43,027          24,701         138,838        203,838
Net earnings (loss)         (10,012)         16,480           4,193          74,669         85,330
Net earnings (loss)
 per common share
   Basic and diluted    $     (0.08)    $      0.13     $      0.03     $      0.57    $      0.65
Weighted average
  common shares
  outstanding
   Basic                131,788,511     131,801,423     131,805,972     131,856,825    131,813,183
   Diluted              131,892,452     131,911,572     132,004,689     132,145,314    131,990,542

MARKET PRICE DATA
  High                  $     10.00    $       9.25     $     10.56     $     15.13    $     15.13
  Low                   $      5.38    $       5.00     $      7.75     $      6.00    $      5.00
</TABLE>

(1) Certain prior year amounts have been reclassified from amounts previously
reported to conform with the 2000 presentation; see Note 1 to the consolidated
financial statements.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.


                                       44
<PAGE>

                                    PART III

ITEM 10.  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)                             57    Chairman of the Board of Directors                       1982
                                                       and Chairman of the Board of Directors
                                                       of Otto Versand (GmbH & Co)(1981)

Dr. Michael E. Crusemann (2)(3)                  55    Board of Directors and Director, Finance                 1994
                                                       of Otto Versand (GmbH & Co) and Chief
                                                       Financial Officer of Otto Versand Group
                                                       (1994)

Richard T. Fersch (4)                            51    President and Chief Executive Officer,                   1996
                                                       Eddie Bauer

Hans Jorg Hammer                                 61    Retired.  Prior to October 1999 was a                    1991
                                                       member of the Board of Directors and Director,
                                                       Personnel of Otto Versand (GmbH & Co)

Horst R. Hansen (2)                              66    Retired.  Prior to March 1994 was a member               1982
                                                       of the Board of Directors and Director,
                                                       Finance of Otto Versand (GmbH & Co) and Chief
                                                       Financial Officer of Otto Versand Group

George D. Ittner (4)                             57    President and Chief Executive Officer,                   1998
                                                       Newport News

Dr. Wolfgang Linder                              52    Deputy Member of the Board of Directors and              2000
                                                       Director, Information Technology of
                                                       Otto Versand (GmbH & Co)(2000); Managing
                                                       Director of Handelsgesellschaft Heinrich
                                                       Heine GmbH (GmbH & Co)(1993)

Michael R. Moran (1)(3)(4)                       54    Chairman of the Office of the President and              1997
                                                       Chief Legal Officer

Dr. Peter Muller (2)                             59    Retired.  Prior to January 1998 was a                    1985
                                                       member of the Board of Directors and
                                                       Director, Advertising and Marketing of
                                                       Otto Versand (GmbH & Co)

Melissa J. Payner (4)                            42    President and Chief Executive Officer,                   2000
                                                       Spiegel Catalog

Gert Rietz                                       54    Board of Directors and Director, Merchandise             1997
                                                       of Otto Versand (GmbH & Co)(1989)

Hans-Otto Schrader                               44    Deputy Member of the Board of Directors and              2000
                                                       Director, Personnel of Otto Versand (GmbH & Co)
                                                       (1999); Merchandising Manager of Otto Versand
                                                       (GmbH & Co)(1993)


                                       45
<PAGE>

James W. Sievers (3)(4)                          58   Office of the President, Chief Financial                 1997
                                                      Officer

Dr. Peer Witten                                  55   Board of Directors and Director,                         1991
                                                      Operations of Otto Versand (GmbH & Co) (1984)

Martin Zaepfel (1)                               57   Deputy Chairman of the Board of Directors                1996
                                                      of Otto Versand (GmbH & Co) and Director,
                                                      Marketing and Advertising of Otto Versand
                                                      (GmbH & Co)(1998); Board of Directors and
                                                      Director, Merchandise of Otto Versand
                                                      (GmbH & Co)(1988)

Dr. Winfried Zimmerman                           43   Deputy Member of the Board of Directors and              2000
                                                      Director, Planning and Control of
                                                      Otto Versand (GmbH & Co)(2000); From April
                                                      2000 to July 2000 was Managing Director of
                                                      Handelsgesellschaft Heinrich Heine GmbH
                                                      (GmbH & Co); Manager Planning and Control
                                                      of Otto Versand (GmbH & Co)(1997);
                                                      Department Manager Controlling Group
                                                      Participations of Otto Versand
                                                      (GmbH & Co)(1996)
</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 2001.

There is no family relationship between any of the directors.


                                       46
<PAGE>

EXECUTIVE OFFICERS

The following persons are the executive officers and certain significant
employees 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>
EXECUTIVE OFFICERS OF SPIEGEL, INC.:

Michael R. Moran                                 54       Chairman (1998) of the Office of the President
                                                          (1997) and Chief Legal Officer (1997); Senior Vice
                                                          President, Secretary & General Counsel (1996);
                                                          Vice President, Secretary & General Counsel(1988);
                                                          and Director (1997)

James W. Sievers                                 58       Office of the President (1997) and Chief Financial
                                                          Officer (1994); Senior Vice President, Finance
                                                          (1995); and Director (1997)

David M. Boothby                                 50       Senior Vice President of Group Operations (2001); Senior
                                                          Vice President Sales Support Operations (1998); Vice
                                                          President Managing Director of Ultimate Outlet Catalog &
                                                          Stores (1997); Store Director Macy's Department Stores
                                                          (1993)

Richard T. Fersch                                51       President (1992) and Chief Executive Officer (1997), Eddie Bauer; and
                                                          Director (1994)

George D. Ittner                                 57       President (1992) and Chief Executive Officer (1997), Newport News; and
                                                          Director (1998)

David Kardesh                                    46       Senior Vice President and Chief Information Officer (2001);
                                                          Vice President Applications Development (1998); Divisional Vice
                                                          President Applications Development (1997); Director of
                                                          Corporate Systems for May Department Stores (1980)

Melissa J. Payner                                42       President and Chief Executive Officer Spiegel Catalog and Director (2000);
                                                          Senior Vice President Merchandising/Advertising Creative
                                                          (1998); Vice President Managing Director of
                                                          Merchandising/ Advertising Creative (1997); President of
                                                          CHICO FAS, Inc., a women's apparel specialty store
                                                          chain, (1995)

John R. Steele                                   48       Vice President (1995) and Treasurer (1993)


CERTAIN SIGNIFICANT EMPLOYEES:

Gregory R. Aube                                  48       President (1995) and Chief Executive Officer (1999) of FCNB

Richard M. Lauer                                 46       President and Chief Executive Officer of DFS (1999); Senior Vice
                                                          President of DFS (1999); Vice President, Operations of DFS (1998);
                                                          Vice President, Engineering and Systems Services of DFS (1996)
</TABLE>


                                       47
<PAGE>

Michael R. Moran, Chairman of the Office of the President and Chief Legal
Officer, and James W. Sievers, Office of the President and Chief Financial
Officer, will retire effective June 30, 2001. Effective July 1, 2001 Martin
Zaepfel will become President and Chief Executive Officer of the The Spiegel
Group. Jim Cannataro, Executive Vice President and Chief Financial Officer of
Eddie Bauer, will become Chief Financial Officer of the Spiegel Group effective
July 1, 2001.

There is no family relationship between any of the officers.

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table and accompanying footnotes set forth all compensation paid
or accrued by the Company for the years ended December 30, 2000, January 1, 2000
and January 2, 1999 to or on behalf of each of the five most highly compensated
key policy-making executives currently serving as officers of the Company and
includes one former officer not serving as of the end of the fiscal year.

<TABLE>
<CAPTION>
                                  Annual
                                Compensation          Stock                All (3)
Name and                      ----------------        Options   LTIP (2)   Other
Principal                      Salary    Bonus        Granted   Payout     Compensation
Position                Year   ($)       ($)          (#)       ($)        ($)
-------------------    ------  --------  ----------  ---------  ---------- ------------
<S>                    <C>     <C>       <C>         <C>        <C>        <C>
Michael R. Moran        2000   $ 425,022 $  360,450     20,000   $637,500     $211,361
Chairman of the Office  1999     400,006    466,650     20,000          -      260,923
of the President and    1998     318,462    267,436     15,000    242,300       90,717
Chief Legal Officer
and Director

James W. Sievers        2000   $ 400,010 $  339,250     20,000   $600,000     $240,090
Office of the           1999     364,000    429,150     20,000          -      253,609
President and Chief     1998     343,077    224,077     15,000    243,700       72,686
Financial Officer
and Director

Richard T. Fersch       2000  $1,000,012 $  500,000     20,000   $375,000     $285,940
President and Chief     1999     796,156  1,114,185     20,000          -      387,280
Executive Officer of    1998     750,000          -     15,000          -      105,265
Eddie Bauer and
Director

Melissa J. Payner       2000  $  400,010 $  421,450     26,000   $600,000     $158,911
President and Chief     1999     367,890    406,300      4,000          -      162,719
Executive Officer of    1998     300,000    152,950      5,000    109,750       56,924
Spiegel Catalog and
Director

George D. Ittner        2000  $  448,281 $  606,250     20,000   $675,000     $114,232
President and Chief     1999     423,346    428,313     20,000          -       55,007
Executive Officer of    1998     400,000    377,610     15,000    368,932       27,108
Newport News and
Director

John W. Irvin (1)       2000  $  550,000 $1,168,800          -   $825,000   $6,703,895
President and Chief     1999     523,088    590,650     20,000          -      327,981
Executive Officer of    1998     500,000    300,000     15,000    331,000       94,956
Spiegel and Director
</TABLE>


                                       48
<PAGE>

     (1)  John W. Irvin resigned from the Company in December 2000. As part of
          his severance agreement he will receive $6,571,512 in 2001.


     (2)  Certain executives of the Company earned long-term incentive bonuses
          in 2000 and 1998. The long-term incentive plan for bonuses earned in
          2000 covered the operating and financial performance of the individual
          divisions for 1999 and 2000, with the payout formula heavily weighted
          to the 2000 performance. The long-term incentive plan for bonuses
          earned in 1998 covered the operating and financial performance of the
          individual divisions for 1997 and 1998, with the payout formula
          heavily weighted to the 1998 performance.

     (3)  The following tables summarize all other compensation for the years
          ended December 30, 2000, January 1, 2000 and January 2, 1999:

<TABLE>
<CAPTION>
                                    Retirement
                  Name               Benefits        Other             Total
              -------------------- ------------ ---------------  --------------
<S>                                 <C>          <C>               <C>
         2000 Michael R. Moran      $ 161,411    $   49,950        $  211,361
              James W. Sievers        192,261        47,829           240,090
              Richard T. Fersch       242,954        42,986           285,940
              Melissa J. Payner       125,028        33,883           158,911
              George D. Ittner         82,452        31,780           114,232
              John W. Irvin            76,451     6,627,444         6,703,895


         1999 Michael R. Moran      $ 208,745    $   52,178        $  260,923
              James W. Sievers        199,244        54,365           253,609
              Richard T. Fersch       333,322        53,958           387,280
              Melissa J. Payner       112,203        50,516           162,719
              George D. Ittner         43,013        11,994            55,007
              John W. Irvin           249,966        78,015           327,981


         1998 Michael R. Moran      $  27,069    $   63,648        $   90,717
              James W. Sievers         29,162        43,524            72,686
              Richard T. Fersch        63,750        41,515           105,265
              Melissa J. Payner         6,346        50,578            56,924
              George D. Ittner          3,200        23,908            27,108
              John W. Irvin            42,500        52,456            94,956
</TABLE>


                                       49
<PAGE>

OPTION GRANTS TABLE

The following table sets forth grants of stock options to the named executive
officers during the year ended December 30, 2000 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    Exercise                 Price Appreciation
                    Options    Employees     Price    Expiration         for Option
Name                Granted    in 2000       ($/sh)      Date        5% ($)     10% ($)
------------------ --------- -------------  -------- -----------   --------   ---------
<S>               <C>        <C>            <C>      <C>          <C>         <C>
Michael R. Moran     20,000       8.3%        4.27     12/29/10     53,708     136,106

James W. Sievers     20,000       8.3%        4.27     12/29/10     53,708     136,106

Richard T. Fersch    20,000       8.3%        4.27     12/29/10     53,708     136,106

Melissa J. Payner     1,000       0.4%        7.00      2/28/10      4,402      11,156
                      5,000       2.1%        7.41      8/08/10     23,301      59,048
                     20,000       8.3%        4.27     12/29/10     53,708     136,106

George D. Ittner     20,000       8.3%        4.27     12/29/10     53,708     136,106
</TABLE>


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

AGGREGATED OPTION EXERCISES IN 2000 AND DECEMBER 30, 2000 OPTION VALUES

The following table sets forth shares acquired on exercise and stock option
values at December 30, 2000:
<TABLE>
<CAPTION>
                                         Number of Securities      Value of Unexercised
                                        Underlying Unexercised     In-the-Money Options
                   Shares                    Options at                     at
                  Acquired               December 30, 2000          December 30, 2000
                    On       Value     Exercise-  Unexercise-    Exercise-   Unexercise-
      Name        Exercise  Realized     able       able           able        able
----------------  --------  --------  ---------  ----------    -----------   -----------
<S>               <C>       <C>       <C>        <C>           <C>           <C>
Michael R. Moran         -         -    39,500      60,000        $     -           $850

James W. Sievers         -         -    40,000      60,000        $     -           $850

Richard T. Fersch        -         -    90,400      62,000        $     -           $850

Melissa J. Payner        -         -     1,800      35,200        $     -           $850

George D. Ittner         -         -    26,000      69,000        $     -           $850

John W. Irvin            -         -    53,000      52,000        $     -           $  -
</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.


                                       50
<PAGE>

EMPLOYMENT AGREEMENTS

The Company has an employment agreement with Richard T. Fersch, President and
Chief Executive Officer of Eddie Bauer, the term of which extends through
December 31, 2002. The annual base salary under this agreement is $1,000,000 per
year. The agreement also entitles Mr. Fersch to receive an annual bonus based
upon the financial performance of Eddie Bauer. The bonus opportunity for the
remaining two years of the agreement is 100 percent of base salary. During all
two remaining years of this agreement, Mr. Fersch is guaranteed 50 percent of
the eligible bonus opportunity.

The Company has an employment agreement with Melissa J. Payner, President and
Chief Executive Officer of Spiegel Catalog, the term of which extends through
December 31, 2003. The current annual base salary under this agreement is
$550,000. The agreement entitles Ms. Payner to receive an annual bonus based on
the financial performance of Spiegel.

The Company has an employment agreement with George D. Ittner, President and
Chief Executive Officer of Newport News, the term of which extends through
December 31, 2003. The current annual base salary under this agreement is
$450,000. The agreement entitles Mr. Ittner to receive an annual bonus based on
the financial performance of Newport News.

The Company has employment agreements with Michael R. Moran, Chairman of the
Office of the President and Chief Legal Officer, the terms of which extend
through June 30, 2001. The current annual base salary under this agreement is
$445,000. The agreements entitle Mr. Moran to receive a bonus for 2001. The
agreements also provide for special payments in July of 2001 as well as other
normal retirement benefits subsequent to his planned retirement on June 30,
2001.

The Company has employment agreements with James W. Sievers, Office of the
President and Chief Financial Officer, the terms of which extend through June
30, 2001. The current annual base salary under this agreement is $420,000. The
agreements entitle Mr. Sievers to receive a bonus for 2001. The agreements also
provide for special payments in July of 2001 as well as other normal retirement
benefits subsequent to his planned retirement on June 30, 2001.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board Committee, which determines executive officer compensation, consists
of Dr. Michael Otto, Martin Zaepfel, and Michael Moran. Mr. Moran also serves as
the Chairman of the Office of the President of the Company.

EMPLOYEE BENEFITS

               STOCK OPTION PLAN

               The Spiegel, Inc. Salaried Employee 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 periodically. Certain salaried
               employees of the Company are eligible to participate in the plan.
               Options are granted to those eligible employees as determined by
               the Stock Option Committee. 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
               the current plan is 1,000,000. The participants' options become
               exercisable at the rate of 20 percent 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. Stock options
               outstanding under the above plan were 614,000 at December 30,
               2000.


                                       51
<PAGE>

               In addition to the stock option plan discussed above, 484,080
               shares were outstanding at December 30, 2000 under a plan that
               expired in 1998. These options were issued under the same terms
               as the plan currently in place. The Company also has a
               non-qualified stock option plan in place for certain former
               employees. Options are granted under this non-qualified plan at
               the discretion of the Board of Directors. Options outstanding
               under the non-qualified plan were 315,000 at December 30, 2000.

               The average per share price of stock options granted during the
               year was $4.38. Net cash realized with respect to the exercise of
               options during the year was approximately $37,000.

               SPIEGEL GROUP VALUE IN PARTNERSHIP PROFIT SHARING AND 401(k)
               SAVINGS PLAN

               The Company maintains two consolidated Profit Sharing and 401(k)
               Savings Plans for employees of Spiegel (Catalog and corporate),
               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 accounts of eligible
               participants a percentage of considered compensation based on the
               Spiegel, Inc. consolidated earnings before income taxes plus any
               other amounts determined by the Company's Board of Directors. A
               minimum contribution of 4 percent of eligible considered
               compensation will be made, but in no event will the total
               contribution exceed the maximum amount deductible for Federal
               income tax purposes. Company contributions and forfeitures are
               allocated among eligible participants in proportion to considered
               compensation.

               Employees may also contribute up to 10 percent 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
               percent of base compensation and 50 cents for each dollar
               contributed up to the next 3 percent. The Company matches hourly
               employee contributions 25 cents for each dollar contributed up to
               6 percent of base compensation. The Company's matching
               contributions, however, may not exceed the amount deductible
               under the Internal Revenue Code. A participant can make
               nondeductible after-tax contributions to the plan of up to 5
               percent of their considered compensation, subject to special
               limitations imposed by the Internal Revenue Code thereon.

               All contributions and investments are held in a trust for the
               benefit of plan participants. All employees who participate in
               the plan are 100 percent 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 are permitted to borrow from their account, but may
               have only one outstanding loan at a time. Repayment is made
               through payroll deductions. Participants who suffer a financial
               hardship as defined by the Internal Revenue Code and who are not
               eligible for a loan may withdraw amounts from the plan while
               still employed. In addition, participants may annually receive a
               distribution of their after-tax contributions. All participants
               may request a distribution of the full value of their accounts
               under the plan upon retirement after age 62 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.

               Effective January 1, 2001 associates will be immediately eligible
               for voluntary pretax and after-tax contributions upon starting
               employment.


                                       52
<PAGE>

               NEWPORT NEWS, INC. RETIREMENT SAVINGS PLAN

               The Company maintains a separate retirement savings plan covering
               employees of Newport News. Associates become eligible to
               participate immediately upon starting employment. Associates may
               elect to contribute up to 10 percent of their compensation to the
               plan on a pre-tax basis under Section 401(k) of the Internal
               Revenue Code. The associate also may elect to make nondeductible
               after-tax contributions to the plan of up to 5 percent of their
               compensation. The company matches pretax contributions at a rate
               of 50 percent of the first 4 percent of compensation contributed.
               The company 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 are 100 percent 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 five years.
               Participants are permitted to borrow from their account, but may
               have only one outstanding loan at a time. Repayment is made
               through payroll deductions. Participants who suffer a financial
               hardship as defined by the Internal Revenue Code and who are not
               eligible for a loan may withdraw amounts from the plan while
               still employed. In addition, participants may annually receive a
               distribution of their after-tax contributions. All participants
               may request a distribution of the full value of their accounts
               under the plan upon retirement after age 62 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.

               Effective January 1, 2001 the Newport News Retirement Savings
               Plan and its participants will be merged into the Spiegel Group
               Value in Partnership Profit Sharing and 401(k)Savings plans.

               SPIEGEL, INC., SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

               The Company maintains an unfunded supplemental retirement plan
               for the benefit of certain employees covered by the retirement
               plans described above (the "profit sharing and thrift plans")
               whose benefits under the profit sharing and thrift plans are
               reduced by application of Sections 401(a)(17) and 402(g)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 a grantor trust in the amount
               of the reduction. The Plan also provides additional supplemental
               benefits to certain key employees. An annual contribution to a
               grantor trust will be made on behalf of these participants equal
               to the sum of (1) an amount based on compensation limited by the
               Social Security Taxable Wage Base, plus (2) profit sharing
               contribution on annual incentive. 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, disability or reaching retirement age.


                                       53
<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 equal to three times his base salary. The employee
               portion of the annual premium is equal to the lowest allowable
               premium according to IRS requlations. 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. On the death of the employee, any amounts due to the
               Company are paid with the balance of the proceeds distributed as
               directed by the employee.

               EXECUTIVE BONUS AND INCENTIVE PLANS

               The Company maintains various annual 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 annual operating and financial performance
               objectives. In addition, the Company periodically offers a
               long-term incentive bonus plan. Payment of long-term incentive
               bonuses is based on the attainment of pre-determined operating
               and financial performance objectives that span more than one
               year. Expense related to the above bonus plans approximated $34
               million in 2000.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

a.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Spiegel Holdings, Inc. (SHI) holds 99.9% 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
16, 2001, was two.

<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)           116,957,089           Class B             99.9%
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. Dr. Otto is a director of the Company. No officers or other
     directors of the Company are Class B stockholders of record or beneficial
     stockholders thereof.


                                       54
<PAGE>

b.  SECURITY OWNERSHIP OF MANAGEMENT

As of March 16, 2001, 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:

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

Class A    Gregory A. Aube               9,254           7,600             *

Class A    Richard T. Fersch           101,400          97,800             *

Class A    George D. Ittner             41,400          39,000             *

Class A    David Kardesh                 3,200           1,300             *

Class A    Richard M. Lauer              1,200           1,200             *

Class A    Michael R. Moran             65,500          45,500             *

Class A    Melissa J. Payner             4,200           4,200              *

Class A    Dr. Peter Muller             10,000               -             *

Class A    Gert Rietz                   29,500               -             *

Class A    James W. Sievers             50,000          42,000             *

Class A    John R. Steele                3,650           3,400             *

Class A    All directors and           319,304         242,000           2.1%
           officers as a group
           (20 persons)
</TABLE>

(1) 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 16, 2001.

* Less than 1%.


                                       55
<PAGE>

ITEM 13.  CERTAIN TRANSACTIONS (000S OMITTED)

Otto Versand (GmbH & Co) ("Otto Versand"), a privately-held German partnership,
acquired the Company in 1982. In April 1984, Otto Versand transfered its
interest in the Company to its partners and designees. 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, Poland, Brazil 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 $6,786, $4,994 and $4,035 in 2000, 1999 and 1998, respectively. The
arrangements are indefinite in term but may generally be canceled by either
party upon one year 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
through the direct sales channels and retail stores. Otto Versand owns Together,
Ltd. Commission expenses incurred on this account were $3,161, $2,949 and $2,697
in 2000, 1999 and 1998, respectively. These expenses include certain production
services, the cost of which would normally be borne by the Company, including
design of the product, color separation, catalog copy and layout, identification
of suggested manufacturing sources and test marketing information.

In 1993, the Company formed a joint venture with Otto-Sumisho, Inc. (a joint
venture company of Otto Versand and Sumitomo Corporation) and entered into
license agreements to sell Eddie Bauer products through retail stores and the
direct sales channels in Japan. 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. There were 41 stores open in Japan as
of December 30, 2000. To date, Eddie Bauer has contributed $9,290 to the project
and in 1994, received a $2,500 licensing fee for the use of its name. Eddie
Bauer received $3,790, $5,007 and $4,547 in royalty income on retail and direct
sales during 2000, 1999 and 1998, respectively. Eddie Bauer recorded a loss of
$706 in 2000 and income of $553 and $275 in 1999 and 1998,respectively for its
equity share of the joint venture.

During 1995, Eddie Bauer formed a joint venture with Heinrich Heine GmbH and
Sport-Scheck GmbH (both subsidiaries of Otto Versand) and entered into license
agreements to sell Eddie Bauer products through retail stores and direct sales
channels in Germany. 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. There were eight stores open in Germany as of December
30, 2000. Eddie Bauer has contributed $12,094 to the project and has received
$1,000 in licensing fees for the use of its name. Eddie Bauer received $1,249,
$1,449 and $1,033 in royalty income on retail and direct sales during 2000, 1999
and 1998, respectively. Eddie Bauer recorded approximately $1,641, $2,559 and
$4,394 of losses for its equity share of the joint venture during 2000, 1999 and
1998, respectively.

During 1996, Eddie Bauer formed a joint venture with Grattan plc (a subsidiary
of Otto Versand) and entered into license agreements to sell Eddie Bauer
products through retail stores and catalogs in the United Kingdom. The Company
believes that the terms of the arrangement were no less favorable to Eddie Bauer
than would be the case in an arrangement with an unrelated third party. Eddie
Bauer contributed $4,585 to the project and received a licensing fee of $667 in
1998 for the use of its name. In addition, Eddie Bauer received $116, $481, and
$209 in 2000, 1999 and 1998, respectively, in royalty income on retail and
catalog sales. In October 1999, Eddie Bauer and Grattan plc agreed to terminate
the Eddie Bauer UK operation. The closure was complete in the first quarter of
2000. Eddie Bauer recorded losses of approximately $3,166 and $2,685 in 1999 and
1998, respectively, for its equity share of the joint venture. Additionally, a
$5,000 charge was recorded in 1999 representing the Company's equity share of
the costs estimated to discontinue the joint venture.


                                       56
<PAGE>

In 1993, Eddie Bauer entered into an agreement with Eddie Bauer International,
Ltd. (EBI) (a subsidiary of Otto Versand) whereby the latter acts as buying
agent in Asia (EBI-Hong Kong) and in 1997 with Eddie Bauer International
(Americas), Inc. (EBI-Miami). The buying agents contact suppliers, inspect goods
and handle shipping documentation for Eddie Bauer. The Company believes that the
terms of the arrangements are no less favorable to Eddie Bauer than would be the
case in an arrangement with an unrelated third party. The Company paid $19,535,
$20,030 and $20,173 to EBI-Hong Kong for these services in 2000, 1999 and 1998,
respectively. The Company paid EBI-Miami $4,482, $4,151 and $3,226 for these
services in 2000, 1999 and 1998, respectively. Additionally in 1998, the Company
received $3,750 from EBI-Miami in exchange for services rendered to EBI-Miami.
These services related to the startup of EBI-Miami's operations and included
general consulting and training.

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.


                                       57
<PAGE>

                                                 PART IV

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

<TABLE>
<CAPTION>
                                                                            PAGE
<S>              <C>                                                          <C>
A.               1.     FINANCIAL STATEMENTS

                        Consolidated Balance Sheets                           19
                        Consolidated Statements of Earnings                   20
                        Consolidated Statements of Cash Flows                 21
                        Consolidated Statements of Stockholders' Equity       22
                        Notes to Consolidated Financial Statements            23-41
                        Report of Independent Auditors                        43
                        Selected Quarterly Financial Data                     44


                 2.     FINANCIAL STATEMENT SCHEDULE

                        Independent Auditors' Report on Schedule              60
                        Schedule II--Valuation and Qualifying Accounts        61


                        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.
</TABLE>

                                       58
<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. 33-69937) replacing (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 KPMG LLP

                  24               Powers of Attorney (iv)

                  99               Audit Committee Report

         (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. 33-69937, 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

         A Current Report on Form 8-K dated November 29, 2000 was filed with the
Securities and Exchange Commission on November 29, 2000 to report, under Item 5,
that the board of directors of Spiegel, Inc. announced the appointment of Martin
Zaepfel as president and chief executive officer and vice chairman of the board
of directors of Spiegel, Inc., effective July 1, 2001.

         A Current Report on Form 8-K dated December 15, 2000 was filed with the
Securities and Exchange Commission on December 15, 2000 to report, under Item 5,
the press release announcing the appointment of Melissa Payner as president and
chief executive officer of Spiegel Catalog, Inc., succeeding John Irvin.


                                       59
<PAGE>

         INDEPENDENT AUDITORS' REPORT ON SCHEDULE

         The Board of Directors and Stockholders
         Spiegel, Inc.:

         Under date of February 14, 2001, we reported on the consolidated
         balance sheets of Spiegel, Inc. and subsidiaries as of December 30,
         2000 and January 1, 2000, 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, 2000, 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. 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 LLP
                                                           KPMG LLP

         Chicago, Illinois
         February 14, 2001


                                       60
<PAGE>

                                                                     SCHEDULE II

                         SPIEGEL, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                  December 30,  January 1, January 2,
                                                     2000         2000        1999
                                                  ---------    ---------   ----------
<S>                                               <C>          <C>          <C>
         ALLOWANCE FOR DOUBTFUL ACCOUNTS

         Balance at beginning of year             $ 27,042     $ 11,843     $ 14,922
           Charged to earnings                      72,701       42,590       29,837
           Reduction for receivables sold          (69,366)     (17,416)     (10,791)
           Accounts written off, net of
             recoveries                            (11,905)      (9,975)     (22,125)
                                                  ---------    ---------   ----------
           Balance at end of year                 $ 18,472     $ 27,042     $ 11,843
                                                  =========    =========   ==========
</TABLE>


                                       61
<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 30, 2001.

                                      SPIEGEL, INC.



                                      By: /s/ Michael R. Moran
                                      Michael R. Moran, Chairman of
                                      the Office of the President and
                                      Chief Legal Officer (Principal
                                      Operating Executive Officer)


                                      /s/ James W. Sievers
                                      James W. Sievers, Office of the
                                      President and Chief Financial Officer
                                      (Principal Operating Executive Officer
                                      and Principal Financial and Accounting
                                      Officer)


                                       62
<PAGE>

         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 30, 2001.

<TABLE>
<CAPTION>
                  Signature                                             Title
         --------------------------          ------------------------------------------
         <S>                                 <C>



         /s/ Michael R. Moran                 Chairman of the Office of the President and
         Michael R. Moran                     Chief Legal Officer (Principal Operating
                                              Executive Officer) and Director



        /s/ James W. Sievers                  Office of the President, Chief Financial
        James W. Sievers                      Officer (Principal Operating Executive Officer
                                              and Principal Financial and Accounting Officer)
                                              and Director

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

         /s/ Richard T. Fersch                                 Director
         Richard T. Fersch

         /s/ Gert Rietz                                        Director
         Gert Rietz

         /s/ Melissa J. Payner                                 Director
         Melissa J. Payner

         /s/ George D. Ittner                                  Director
         George D. Ittner

         /s/ Dr. Peer Witten                                   Director
         Dr. Peer Witten

         /s/ Martin Zaepfel                                    Director
         Martin Zaepfel
</TABLE>


                                       63