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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 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 January 31, 1998
                                       OR
[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
For the transition period from               to

                        Commission file number 1-12703

                                  BRYLANE INC.
             (Exact name of registrant as specified in its charter)

           Delaware                                     13-3794198
(State or other jurisdiction of                      (I.R.S. Employer
 incorporation or organization)                     Identification No.)

                               463 Seventh Avenue
                              New York, NY  10018
                    (Address of principal executive offices)

      Registrant's telephone number, including area code:  (212) 613-9500

 Securities registered pursuant to Section 12(b) of the Act:  Common Stock, par
                              value $.01 per share
Name of each exchange on which registered:  New York Stock Exchange (the "NYSE")

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

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                              YES   X    NO _____
                                  -----          

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

     The aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant on April 16, 1998, based on the closing price
at which the Common Stock was sold on the NYSE as of April 16, 1998, was $59.00.

     The number of shares of the Registrant's Common Stock outstanding as of
April 16, 1998 was 18,408,650 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's definitive Proxy Statement for the 1998 Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A (including the Appendix thereto) are incorporated by
reference in Part III of this Report.
================================================================================
<PAGE>
 
                                  BRYLANE INC.

                      INDEX TO ANNUAL REPORT ON FORM 10-K

                   For the fiscal year ended January 31, 1998


<TABLE>
<CAPTION>
                                                                   Page
                                                                   ----
                                    PART I
<S>           <C>                                                  <C>
Item 1.       Business..........................................      2
Item 2.       Properties........................................     17
Item 3.       Legal Proceedings.................................     17
Item 4.       Submission of Matters to a Vote of
              Security Holders..................................     17
 
                                   PART II
 
Item 5.       Market for Registrant's Common Equity
              and Related Stockholder Matters...................     18
Item 6.       Selected Financial Data...........................     20
Item 7.       Management's Discussion and Analysis of
              Financial Condition and Results of
              Operations........................................     22
Item 8.       Financial Statements and Supplementary Data.......     33
Item 9.       Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure............     33
 
                                   PART III
 
Item 10.      Directors and Executive Officers of the Registrant     34
Item 11.      Executive Compensation............................     34
Item 12.      Security Ownership of Certain Beneficial
              Owners and Management.............................     34
Item 13.      Certain Relationships and Related Transactions....     34
 
                                   PART IV
 
Item 14.      Exhibits, Financial Statement
              Schedules, and Reports on Form 8-K................     35
</TABLE>
<PAGE>
 
                                     PART I

     As used in this Annual Report on Form 10-K ("Form 10-K"), unless the
context indicates otherwise, the terms "Company" and "Brylane" refer to Brylane
Inc., a Delaware corporation, its wholly-owned subsidiaries VP Holding
Corporation, a Delaware corporation ("VP Holding"), VGP Corporation, a Delaware
corporation ("VGP"), VLP Corporation, a Delaware corporation ("VLP"), and
Brylane, L.P., a Delaware limited partnership (the "Partnership"), and the
Partnership's predecessor companies.  The term "subsidiaries" refers to the
following subsidiaries and partnerships of the Partnership:  B.L. Catalog
Distribution, Inc., a Delaware corporation and a wholly-owned subsidiary of the
Partnership ("B.L. Distribution"), B.L. Catalog Distribution Partnership, an
Indiana general partnership ("B.L. Distribution Partnership"), B.L. Management
Services, Inc., a Delaware corporation and a wholly-owned subsidiary of the
Partnership ("B.L. Management"), B.L. Management Services Partnership, a New
York general partnership ("B.L. Management Partnership"), B.N.Y. Service Corp.,
a Delaware corporation and a wholly-owned subsidiary of the Partnership ("B.N.Y.
Service"), K.S. Management Services, Inc., a Delaware corporation and a wholly-
owned subsidiary of the Partnership ("K.S. Management"), C.O.B. Management
Services, Inc., a Delaware corporation and a wholly-owned subsidiary of the
Partnership ("C.O.B. Management"), Chadwick's Tradename Sub., Inc., a Delaware
corporation and a wholly-owned subsidiary of the Partnership ("Tradename Sub"),
and Brylane Capital Corp., a Delaware corporation and a wholly-owned subsidiary
of the Partnership ("Brylane Capital"), unless the context indicates otherwise.

     Unless otherwise indicated, as used in this Form 10-K:  (i) all references
to a fiscal year shall mean the fiscal year of the Company which commences in
such year (for example, the fiscal year commencing February 2, 1997 and ending
January 31, 1998 is referred to herein as "fiscal 1997" or "1997"), and (ii) all
numerical and financial data for Brylane includes numerical and financial data
for the Chadwick's catalog operations beginning December 9, 1996 for the eight
weeks ended February 1, 1997, unless the context indicates otherwise.

     On February 26, 1997, as a result of the Exchange Transaction (as defined
herein) and in connection with the Initial Public Offering (as defined herein)
of Brylane Inc., the Partnership became an indirect wholly-owned subsidiary of
Brylane Inc.  Prior to the Exchange Transaction, Brylane Inc. had no
stockholders and no assets.  For periods presented prior to February 26, 1997,
the information, including the financial statements, presented in this Form 10-K
relate to the Partnership as if it had been a wholly-owned subsidiary of Brylane
Inc.

     THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934.  DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING
STATEMENTS MAY BE FOUND IN THE MATERIAL SET FORTH UNDER "ITEM 1. BUSINESS--
GENERAL", "--MARKETING--LIST MANAGEMENT" AND "--COMPETITION", AND "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "--LIQUIDITY AND CAPITAL RESOURCES", AS WELL AS WITHIN THIS FORM
10-K GENERALLY.  SUCH STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS AND
UNCERTAINTIES.  ACTUAL RESULTS IN THE FUTURE COULD DIFFER MATERIALLY FROM THOSE
DESCRIBED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET
FORTH BELOW UNDER "RISK FACTORS".  THE COMPANY UNDERTAKES NO OBLIGATION TO
PUBLICLY RELEASE THE RESULT OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS
THAT MAY BE MADE TO REFLECT ANY FUTURE EVENTS OR CIRCUMSTANCES.

     Lane Bryant(R), Roaman's(R), Lerner(R), Sue Brett(R), Chadwick's(R),
Chadwick's of Boston, Ltd.(R), KingSize(R), Hunters Run(R), David Benjamin(R),
Lasting Comfort(R), Venezia(R), Forenza(R) and Bridgewater(R) are federally
registered trademarks which are owned or licensed by the Company.  Jessica
London, Brett and Peak Performance are common law trademarks which are owned or
licensed by the Company.

     Sears(R) and Woman's View(R) are federally registered trademarks of, and
Smart Choice, Classics and Big & Tall are common law trademarks which are owned
by Sears, Roebuck and Co.

                                       1
<PAGE>
 
ITEM 1.  BUSINESS

GENERAL

     The Company is the nation's leading specialty catalog retailer of value-
priced apparel, with catalogs that target consumers of both special and regular
size apparel.  Through its Lane Bryant and Roaman's catalogs, Brylane is the
leading catalog retailer of women's special size apparel (sizes 14 through 56)
and, through its KingSize catalog, is a leading catalog retailer of men's
special size apparel (sizes XL to 9XL).  The Company's Chadwick's of Boston
catalog division ("Chadwick's"), which the Company acquired in December 1996, is
the nation's largest off-price women's catalog retailer, and offers a broad
selection of high quality apparel at prices typically 25% to 50% below the
regular prices of department and specialty retail stores.  Brylane also reaches
the women's regular size apparel market (sizes 4 to 18) through its Lerner
catalog.  In addition, the Company has recently introduced and continues to
develop several new catalog concepts.  The Company successfully launched the
Bridgewater (regular size women's, men's and children's apparel) in fiscal 1996
and Jessica London (off-price special size women's apparel) and Brett (regular
size men's apparel) catalogs in fiscal 1997.  Brylane also markets apparel to
some of these same customer segments through four catalogs which it distributes
under the "Sears" name to customers of Sears, Roebuck and Co. under an exclusive
licensing arrangement with Sears Shop at Home Services, Inc. ("Sears").

     Brylane's merchandising strategy is to provide value-priced apparel with a
consistent quality and fit, to concentrate on apparel with limited fashion risk,
and to offer a broad selection of sizes, styles and colors.

HISTORY AND BACKGROUND

     Brylane's catalog retail business dates back to the mailing of the first
Lane Bryant catalog in 1924 and the first Roaman's catalog during the 1940s.
Both Lane Bryant and Roaman's were acquired by The Limited, Inc. ("The Limited")
in the early 1980s.  In 1985, the Lerner catalog business was launched to
capitalize on the Lerner name, which had developed as The Limited's Lerner
retail store operations grew to over 800 stores during the 1980s.

     On August 30, 1993, affiliates of Freeman Spogli & Co. Incorporated, a
private investment firm ("FS&Co."), and The Limited formed the Partnership to
acquire these catalog businesses (the "Brylane Acquisition").  FS&Co., together
with certain members of management, acquired a 60% aggregate interest in the
Partnership, while The Limited retained the remaining 40%.  For accounting
purposes, the Brylane Acquisition was recorded as of August 1, 1993.

     On October 16, 1995, the Partnership acquired the KingSize catalog division
(the "KingSize Acquisition") of WearGuard Corporation ("WearGuard"), a wholly-
owned subsidiary of ARAMARK Corporation ("ARAMARK"). In connection with the
KingSize Acquisition, WearGuard assigned to Brylane its license to distribute
the Sears Big & Tall catalog, as well as its interest in certain trademarks,
including the KingSize(R) registered trademark.  As consideration for the sale
of the KingSize catalog division, WearGuard received a payment of $52.5 million
and 350,000 newly issued limited partnership units in the Partnership.  In order
to fund a portion of the purchase price, the Company amended its then existing
1993 bank credit facility to provide for an additional $35.0 million term loan.
For accounting purposes, the KingSize Acquisition was recorded as of October 1,
1995.

     On December 9, 1996, Brylane acquired the Chadwick's of Boston catalog
division of The TJX Companies, Inc. ("TJX"), excluding substantially all
accounts receivable (the "Chadwick's Acquisition").  In connection with the
Chadwick's Acquisition, Brylane and TJX entered into a services agreement, as
well as an inventory purchase agreement pursuant to which TJX has committed to
purchase certain amounts of Chadwick's excess inventory through January 2000.
As consideration for the sale of the Chadwick's of Boston catalog division,
affiliates of TJX received aggregate cash payments of $189.8 million (which is
net of purchase price adjustments of $32.9 million) and a $20.0 million
Convertible Note due 2006 of the Partnership (all of which had been converted as
of April 14, 1998).  In order to fund a portion of the cash paid in connection
with the Chadwick's Acquisition and to repay its then existing indebtedness
under its 1993 bank credit facility, the Partnership entered into the 1996 Bank
Credit Facility (as defined herein).  See "Item 7.  Management's Discussion and
Analysis of Financial Condition and

                                       2
<PAGE>
 
Results of Operations--Liquidity and Capital Resources".  In addition, in
connection with the Chadwick's Acquisition, the Partnership received an
aggregate of $51.3 million in new equity from certain affiliates of FS&Co.,
Leeway & Co., a Massachusetts partnership, as nominee for the Long-Term
Investment Trust, a trust governed by the laws of the State of New York ("Leeway
& Co."), NYNEX Master Trust, a trust governed by the laws of the State of New
York ("NYNEX"), and WearGuard.

     On February 26, 1997, in connection with the initial public offering of
Brylane Inc. (the "Initial Public Offering"), the Partnership became a wholly-
owned subsidiary of Brylane Inc. pursuant to an exchange transaction in which
Brylane Inc. acquired, directly, and indirectly through the acquisition of
wholly-owned subsidiaries, a 100% ownership interest in the Partnership in
exchange for shares of the common stock, $.01 par value (the "Common Stock"), of
Brylane Inc. (the "Exchange Transaction").  In connection with the Exchange
Transaction, the Partnership retained all of its assets, operations and
liabilities.  See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations".

     In October 1997, certain stockholders of the Company (including affiliates
of FS&Co. and an affiliate of The Limited) completed an offering of 5,000,000
shares of Common Stock at a price to the public of $46.00 per share, and
concurrent therewith, the Company repurchased from these same stockholders an
aggregate of 2,500,000 shares of Common Stock at the same price (the "Common
Stock Repurchase"). The Company financed the Common Stock Repurchase (and
related fees) through the incurrence of additional long-term debt in the
aggregate principal amount of approximately $116.8 million.

     On April 3, 1998, Pinault-Printemps-Redoute, S.A., a company organized
under the laws of France ("PPR"), through an affiliate, REDAM LLC, a Delaware
limited liability company, acquired Common Stock from certain stockholders of
the Company (including all of the Common Stock held by affiliates of FS&Co. and
an affiliate of The Limited, as well as 533,109 shares held by certain members
of management of the Company) (the "PPR Stock Purchase").  As a result of the
PPR Stock Purchase, PPR acquired approximately 43.7% of the outstanding shares
of Common Stock.  In connection with the PPR Stock Purchase, the Company and PPR
entered into a governance agreement (the "Governance Agreement") pursuant to
which PPR's ability to acquire additional Common Stock and to take other actions
is limited.  As consideration for the sale, PPR paid the selling stockholders a
price of $51.00 per share.

CUSTOMERS

     The Company has a substantial and loyal customer base.  As of December 31,
1997, Brylane's combined customer files contained 23.4 million customer names
(including 2.7 million names from the Sears catalogs customer file), of which
approximately 10.9 million are active customers (including 1.2 million customers
from the Sears catalogs customer file).  Over 40% of the Lane Bryant, Roaman's
and Lerner active customers placed an order three or more times during the 12
months ended December 31, 1997.  The Company defines a customer as someone who
has placed an order with any of the Company's established catalogs, excluding
its Sears catalogs, within the last 48 months, and an active customer as one who
has placed at least one order with these catalogs within the last 12 months.
Certain of the Company's customers purchase from more than one of the Company's
catalogs and are therefore considered to be a separate customer of each such
catalog.

     CHADWICK'S.  The Chadwick's catalog targets women between the ages of 25
and 55 who wear regular size apparel (sizes 4 to 20) and seek high quality
merchandise at prices well below those offered by department and specialty
stores.  In addition, Chadwick's has expanded its merchandise offerings to
target women who wear petite and special size apparel (sizes 2 to 26).  Brylane
believes that the median age of the Chadwick's customer is 42, and that the
typical customer has an income level equal to or above the national average.  As
of December 31, 1997, the Chadwick's customer file contained 11.0 million
customer names, of which 4.8 million names are active customers.  The average
order by a Chadwick's customer during fiscal 1997 was approximately $87.

     LANE BRYANT AND ROAMAN'S.  The Lane Bryant and Roaman's catalogs target
value-conscious women who wear special sizes (sizes 14 to 56).  Brylane believes
that the median age of its women's special size customer segment is 51, and that
the typical customer has an income level somewhat below that of the national
average.  As

                                       3
<PAGE>
 
of December 31, 1997, the Lane Bryant and Roaman's customer files contained 4.2
million and 2.1 million customer names, respectively, of which approximately 2.2
million and 1.1 million names are active customers of Lane Bryant and Roaman's,
respectively.  The average order by a Lane Bryant and Roaman's customer during
fiscal 1997 was approximately $75 and $74, respectively.

     LERNER.  The Lerner catalog targets younger, value-conscious women age 25
and up who wear sizes 4 to 18 and purchase at low to budget prices.  The Company
believes that the median age of the Lerner customer is 38, and that the average
Lerner customer has an income level approximately equal to the national average.
As of December 31, 1997, the Lerner customer file contained 2.7 million customer
names, of which 1.2 million are active customers.  The average order by a Lerner
customer during fiscal 1997 was approximately $78.

     SEARS CATALOGS.  Through its licensing agreement with Sears, the Company
has expanded its customer base by offering Lane Bryant, Roaman's, Lerner, Sue
Brett (discontinued March 1998) and KingSize merchandise through its Sears
versions of these catalogs to selected individuals from the over 30 million name
customer file of Sears, Roebuck and Co. who are not already existing customers
of the Company.  Brylane believes that the median age and income level of its
Sears customer is close to that of the average customer of the Company's
comparable catalogs.  As of December 31, 1997, the Sears catalogs customer file
contained 2.7 million customer names, of which 1.2 million are active customers.
The average order by a Sears customer during fiscal 1997 was approximately $76
for women's apparel and $100 for men's apparel.  See "--Sears Agreement".

     KINGSIZE.  The KingSize catalog targets value-conscious men who wear
special sizes (sizes XL to 9XL).  The Company believes that the median age of
its men's special size customer segment is 52, and that the typical KingSize
customer has an income level above the national average.  As of December 31,
1997, the KingSize customer file contained 378,000 customer names, of which
193,000 are active customers.  The average order by a KingSize customer during
fiscal 1997 was approximately $93.

     SUE BRETT.  The Sue Brett catalog targets mature regular size women who
wear sizes 6 to 24.  The Company believes that the median age of the Sue Brett
customer is 45, and that the average Sue Brett customer has an income level
somewhat above the national average.  As of December 31, 1997, the Sue Brett
customer file contained 434,000 customer names, of which 251,000 are active
customers.  The average order by a Sue Brett customer during fiscal 1997 was
approximately $71.

     As a result of the Chadwick's Acquisition, and the Company's conclusion
that the Sue Brett catalog targeted customers very similar to those targeted by
Chadwick's and Lerner, the Company has determined to discontinue its circulation
of the Sue Brett (and Sears Classics) catalogs effective March 1998.  The
Company intends to continue to utilize the Sue Brett customer file in connection
with the circulation of its Chadwick's and Lerner catalogs, and to continue to
use the Sue Brett trade name in connection with its other catalogs' apparel
offerings.

MERCHANDISING

     As a result of its targeted merchandising strategies, the Company has
succeeded in developing distinct identities for each of its catalogs.  The
Company's merchandising strategy across all of its catalog titles is (i) to
provide value-priced apparel with a consistent quality and fit, (ii) to
concentrate on apparel with limited fashion risk, and (iii) to offer a broad
selection of sizes, styles and colors.  The Company intends to continue to
refine and broaden its merchandise offerings in order to satisfy the apparel
needs of its customers, to freshen the appeal of each catalog's assortment of
merchandise and to stimulate increased sales.

     CHADWICK'S.  The Company believes that Chadwick's is unique in its ability
to offer value across its merchandise lines, which feature a wide array of
colors, styles and sizes designed to satisfy its customers' wardrobe needs for
career, casual and social wear.  Chadwick's offers merchandise which includes
both basic styles and current fashion.  Chadwick's offers approximately 73,000
stock keeping units ("SKUs"), in sizes 2 to 26.  The average price point per
item sold by Chadwick's in fiscal 1997 was approximately $27.  Chadwick's offers
nationally recognized brand names, including Pierre Cardin, Herman Geist, JG
Hook and Blassport.  The private label brand names featured in the Chadwick's
catalog include, among others, Savannah (which Brylane uses under license from
TJX), Fads, Stephanie Andrews and JL Plum.

                                       4
<PAGE>
 
     Chadwick's has successfully introduced a number of complementary
merchandise categories to its customers.  These categories, which have been
tested and offered on a limited basis, include men's apparel, children's
apparel, women's special size apparel, accessories, gifts and cosmetics.  Since
Chadwick's began offering complementary merchandise categories in 1992, net
sales of these products have grown to represent approximately 22% of Chadwick's
net sales in 1997.

     LANE BRYANT AND ROAMAN'S.  The Lane Bryant and Roaman's special size
catalogs focus primarily on contemporary, traditional and basic women's apparel
and also include a limited offering of certain fashion-oriented items.  While
both the Lane Bryant and Roaman's catalogs offer the same merchandise
classifications, the Lane Bryant catalog offers greater style selections in
certain classifications, especially in basic apparel items.  Both catalogs offer
extensive selections of merchandise over size 26, in many cases offering three
to four times more SKUs than its competitors.  Approximately 45% of Lane Bryant
and Roaman's net sales are in sizes 26 or larger.  Lane Bryant and Roaman's
catalogs offer approximately 83,000 and 49,000 SKUs, respectively, in sizes 14
to 56.  The average price point per item sold by both Lane Bryant and Roaman's
in fiscal 1997 was approximately $22.

     Lane Bryant and Roaman's catalogs feature private label brand names which
have higher gross profit margins than national brand merchandise.  Private label
brand names used on merchandise included in the Lane Bryant and Roaman's
catalogs include, among others, Hunters Run, Venezia, Lasting Comfort and
Forenza, which Brylane uses under licenses from The Limited and the Roaman's
private label brand name, which is owned by the Company.  See "--Trademarks,
Tradenames and Licenses".

     LERNER.  The Lerner catalog offers a broad selection of quality
contemporary, traditional and basic women's apparel in sizes 4 to 18.  Compared
to Chadwick's, the Lerner catalog targets a younger customer and offers slightly
more fashion forward merchandise.  Recently, the Company has made significant
changes to the merchandise offerings contained in its Lerner catalog, including
the addition of an increased number of career wear selections and additional
sizes.  The average price point per item sold by Lerner in fiscal 1997 was
approximately $23.

     Consistent with the Company's other catalogs, the Lerner catalog places
great emphasis on its product sourcing strategy to enable the Company to offer
quality, value-priced, private label merchandise.  The private label brand names
featured on merchandise included in the Lerner catalog include, among others,
David Benjamin and Forenza, which Brylane uses under license from The Limited,
as well as certain other private label brand names which are owned by certain of
Brylane's vendors.  See "--Trademarks, Tradenames and Licenses".

     SEARS CATALOGS.  The merchandise offered in the Sears catalogs is the same
as that offered in the comparable Company catalog:  Woman's View (Lane Bryant
and Roaman's); Smart Choice (Lerner); Classics (Sue Brett); and Big & Tall
(KingSize).  This allows the Company to fill the orders generated by these
catalogs with minimal incremental inventory risk.  The Company has discontinued
circulation of its Classics catalogs effective March 1998.  See "Customers--Sue
Brett" and "--Sears Agreement".

     KINGSIZE.  The KingSize catalog offers a broad selection of quality
contemporary, traditional and basic men's apparel in sizes XL to 9XL.  Although
the KingSize catalog also offers some fashion-oriented items, most of the
merchandise in the KingSize catalog has limited fashion risk.  Brylane believes
that KingSize offers a broader selection of sizes and styles than most specialty
and department stores and competing catalogs.  Approximately 59% of KingSize's
sales (including Big & Tall) are in sizes 3XL or larger.  The average price
point per item sold by KingSize in fiscal 1997 was approximately $27.  In
addition, in October 1997, the Company mailed its first stand-alone Brett
catalog, which is targeted at the regular size men's apparel segment.

     The KingSize catalog features private label brand names which have higher
gross profit margins than national brand merchandise.  Private label brand names
used on merchandise included in the KingSize catalog are KingSize and Peak
Performance, both of which are owned by the Company.

     SUE BRETT.  The Sue Brett catalog (discontinued March 1998) offered quality
contemporary, traditional and basic women's merchandise in sizes 6 to 24.  The
average price point per item sold by Sue Brett in fiscal 1997 was approximately
$28.

                                       5
<PAGE>
 
MARKETING

     There are several important elements to the Company's marketing strategy.

     PROMOTIONAL STRATEGIES.  The Company has implemented highly effective
promotional incentives in many of its catalogs.  Promotional incentives include
deferred and installment billing, free delivery for new customers, free express
delivery for orders of a certain size, "buy one, get one free" strategies,
pricing discounts when purchasing an additional item, and discount offers.
Brylane also uses promotions based on its private label credit cards, such as
credit limit increases to stimulate additional sales from existing customers and
to promote customer loyalty.  The Company has significantly increased the use of
deferred billing programs, under which merchandise purchased is not billed to
the customer's credit card until 90 to 120 days after the applicable catalog is
mailed.  Deferred billing programs have resulted in a significant increase in
net sales and average order size, particularly in the Company's Chadwick's and
Lerner catalogs.  In addition, the Company has expanded the use of these
programs to its other catalogs.

     PRIVATE LABEL CREDIT CARDS.  Brylane views the use of credit as an
important marketing tool with existing and new customers.  Approximately 92.5%
of the Company's total fiscal 1997 sales (including sales from the Company's
Sears catalogs) were paid for using credit cards.  Approximately 51% of the
Company's fiscal 1997 sales (excluding sales from Company's Sears catalogs) from
the Lane Bryant, Roaman's, Lerner, Sue Brett and KingSize catalogs were paid for
using Brylane's private label credit cards.  Through private label cards, the
total amount of credit available to the Company's customers who hold third party
cards can be increased, and credit may be made available to certain of its
customers who may not qualify for third party cards, but are eligible for the
generally lower credit limits available under the private label cards.  The
Company successfully tested a Chadwick's private label credit card in the fall
of 1997.  For catalogs distributed under the Sears Agreement (as defined
herein), customers can use the Sears credit card (but not Brylane's private
label cards).  The Sears credit card is administered by an affiliate of Sears,
which assumes all risks associated with the collection of those credit card
receivables.

     The Company offers its customers the Lane Bryant, Roaman's, Lerner, Sue
Brett and KingSize private label credit cards which are issued by World
Financial Network National Bank ("World Financial"), pursuant to the Credit Card
Processing Agreement between Brylane and World Financial (as amended, the
"Credit Card Agreement").  The Lane Bryant and Lerner private label credit cards
are also issued to customers of the Lane Bryant and Lerner retail stores, and
Lane Bryant and Lerner cardholders can use them either for catalog or store
purchases.  Under the Credit Card Agreement, World Financial determines the
credit worthiness of a particular customer based on a standard credit rating
system and generally assumes all risks associated with the collection of
receivables generated by credit card sales without recourse to the Company.
World Financial processes credit card transactions for a fee equal to a
percentage of the sale amount generated by such transactions (exclusive of
shipping, handling and taxes) and remits the balance of such amount to Brylane
within two business days of its incurrence.  The fee payable to World Financial
under this arrangement is currently set at 2.4% of net sales generated using
these credit cards.  In the event of a legislated or judicial reduction in the
annual percentage rate that may be charged by World Financial to cardholders,
Brylane and World Financial have agreed to negotiate in good faith an increase
in the fee.  In addition, in the event that the aggregate amount of receivables
generated through the use of the credit cards exceeds $525 million, the fee
shall be adjusted to reimburse World Financial for its borrowing costs with
respect to such receivables in excess of $525 million.  Furthermore, the fee may
be adjusted every six months based on the average finance charges per cardholder
statement.  However, the fee may not exceed 2.5% (subject to certain
exceptions).

     Pursuant to the terms of the Credit Card Agreement, Brylane is obligated to
use its best efforts to promote the use of credit cards in the Business (as 
defined) and to acquire new cardholders through, among other things, "instant
credit", pre-approved solicitations and applications inserted into catalogs.
World Financial has the right to review and approve any credit marketing
materials used in these promotional activities prior to their use, which
approval shall not be unreasonably withheld. The cost of these credit
solicitation activities are shared equally by Brylane and World Financial. In
addition, the Credit Card Agreement requires World Financial to provide without
charge to Brylane a list of all Lerner and Lane Bryant retail cardholders on no
more than one occasion per month. Brylane is authorized to use the lists for the
purpose of increasing its catalog mailing lists.

                                       6
<PAGE>
 
     The Credit Card Agreement will remain in effect until terminated (i) by
either party on not less than twelve months' notice delivered on or after July
1, 2005, (ii) by either party upon a breach by the other party of any of its
material obligations under the Credit Card Agreement, (iii) by World Financial
on not less than twelve months' notice if any competitor of The Limited or any
of its affiliates acquires "control" of Brylane (as defined in the Credit Card
Agreement), or (iv) automatically upon certain bankruptcy events involving
Brylane.  See "Risk Factors--Relationship with The Limited".  In the event that
the Credit Card Agreement should terminate, Brylane would be obligated to
repurchase from World Financial certain then-outstanding Lerner and Lane Bryant
mail order account balances, and all Roaman's, Sue Brett and KingSize account
balances, at the face amount thereof (subject to certain exceptions).

     LIST MANAGEMENT.  An important element of the Company's marketing strategy
is the improved segmentation of its existing customer files.  Brylane currently
employs customer file segmentation analyses, based on the recency, frequency and
monetary value of past purchases, to create catalog circulation strategies that
are designed to increase customer response rates and average sales per catalog.
In the fall of 1997, Brylane installed (and is currently testing) a modeling and
scoring software program that uses more sophisticated multi-variable regression
analyses to create its predictive purchasing models.  The Company believes that
the development and refinement of Brylane's predictive purchasing models will
allow Brylane to better target its catalog mailings and more effectively utilize
its customer file.  In addition, Chadwick's is currently testing increasingly
sophisticated statistical circulation models to improve its ability to predict
customer purchasing behavior based on a wide range of variables.  The Company
believes that its ability to better predict customer purchasing behavior
maximizes the effectiveness of its catalog mailings to current and prospective
customers.

     CUSTOMER ACQUISITION.  The Company's prospect acquisition programs are
designed to attract new customers in a cost effective manner.  The Company
utilizes various sources to acquire new names, including list rentals or
purchases from competitors and related catalog concepts; access to lists of
credit card holders of The Limited's Lane Bryant and Lerner retail stores;
licensing arrangements; magazine solicitations; cable television advertising;
promotional inserts; friends' name cards inserted in mailed catalogs; and
reactivation of previous customers of Brylane.  The Company has implemented a
program of cable television advertising to solicit catalog requests for its
KingSize catalog, as well as tests of similar programs for its Lane Bryant and
Roaman's catalogs.  Based on the successful results of the KingSize program and
the test results of the Lane Bryant and Roaman's commercials, the Company has
increased significantly its use of cable television advertising as part of its
efforts to solicit catalog requests and to acquire new customers.  In
conjunction with Sears, the Company has been improving the segmentation of the
over 30 million name Sears, Roebuck and Co. customer file to increase its
success rate with prospects.

     CUSTOMER SERVICE AND TELEMARKETING.  Providing superior service to
customers is a key element of the Company's marketing strategy, and is supported
by the Company's toll-free telephone service for orders and other customer
needs, an emphasis on customer service and friendliness in training for its
telephone sales representatives, and an unconditional guarantee of its
merchandise at any time.  The Company's return policy provides that if a
customer is not satisfied with a purchase for any reason, the merchandise can be
returned to the Company for a refund or exchange.  The return rate for Brylane
(which includes exchanges) for fiscal 1995, 1996 and 1997 was 22.6%, 24.1%, and
25.0% respectively, of shipped sales.

     In fiscal 1997, Brylane received approximately 82.1% of customer orders
through its toll-free phone service.  Brylane utilizes a toll-free service with
separate telemarketing groups and toll-free numbers for each catalog.  The
Company's telemarketing operations are conducted in Indianapolis and Greenwood,
Indiana, San Antonio, Texas and West Bridgewater, Massachusetts.  The Company's
telemarketing operations are open 24 hours a day, seven days a week, and
currently have an aggregate of approximately 1,900 telemarketing/customer
service stations.  In fiscal 1997, Brylane processed approximately 30.4 million
calls at its Indianapolis, Greenwood, San Antonio and West Bridgewater
facilities, and Brylane outsourced 3.6 million calls to a third-party call
center.  The number of associates manning these stations varies greatly during
the hours of each day of each selling season, based on anticipated call volume.

     The Company trains its telephone sales representatives to determine the
correct size for its special size customers.  The proper fit for all customers
is ensured by the Company's merchandising emphasis on consistent

                                       7
<PAGE>
 
sizing and fit across its product lines.  Brylane's computerized database
provides the sales representatives with on-line information about previous
customer orders, which allows the sales representatives to personalize each
transaction.  Brylane's computerized database also includes an inventory control
system, which allows Brylane's telephone sales representatives to inform
customers immediately about merchandise availability and estimated delivery
dates for back-ordered merchandise.

     As part of its efforts in this area, Brylane's sales representatives are
trained to describe current sales items or other promotions to customers.
Brylane's promotional selling efforts resulted in an additional $31.5 million in
net sales during fiscal 1997 and an additional $24.0 million in fiscal 1996.
The telephone switches at Brylane's four facilities enable it to efficiently
balance its incoming telephone calls during periods of heavy call volume.
Brylane's telephone switch at its Indianapolis telephone center enabled it to
significantly increase its telephone volume capacity and to reduce costs by
providing more accurate and timely information to management.  Brylane has the
ability to reroute calls between each catalog's telemarketing groups and
Brylane's four telemarketing centers during periods of heavy activity.  In
addition, in June 1996, Brylane renegotiated its agreement with its long-
distance telephone service provider to, among other things, reduce the rates
charged to Brylane for its long-distance telephone service.

     The Company plans to integrate its existing Brylane and Chadwick's
telemarketing order entry systems in order to provide its customer service
representatives with improved information including past purchases, data on
customer orders and updated catalog information.  This additional information is
expected to increase the ability of these sales representatives to personalize
transactions, market additional products that complement the purchases being
made by the customer and recommend alternatives for items that are either
unavailable or on back order.  The integrated systems will utilize "universal
agents" that receive both telephone orders and customer service calls which the
Company believes will lead to an increase in productivity.  The Company also
expects that the integrated systems will permit it to process orders more
efficiently.

FULFILLMENT, DELIVERY AND CATALOG PRODUCTION

     Through its fulfillment, delivery and catalog production methods, the
Company works to maintain its position as a low-cost operator in the catalog
industry.

     FULFILLMENT CENTERS.  The Company's commitment to customer service is
supported by its 750,000 square foot Indianapolis, Indiana fulfillment center,
which supports its Brylane catalogs, and its 700,000 square foot West
Bridgewater, Massachusetts facilities, which support its Chadwick's catalogs.
Designed to process and ship customer orders rapidly and in a cost effective
manner, each fulfillment center utilizes high speed conveyor belts, laser beam
bar code scanning and tilt tray sorters.  The Indianapolis facility processed
approximately 19.5 million shipments in fiscal 1997.  In the fall of 1994,
Brylane developed and implemented "one-pass picking", a highly sophisticated and
efficient method for gathering the merchandise needed to fill customer orders,
at its Indianapolis fulfillment center.  In September 1995, Brylane completed an
$8.0 million enhancement of the package sorting and shipping capabilities of the
Indianapolis fulfillment center, including the addition of a second high speed
tilt tray sorter.  These enhancements to the fulfillment center approximately
doubled Brylane's shipping and receiving capabilities.  In addition, Brylane
completed a $2.7 million project to replace the original tilt tray sorter, which
replacement became operational in the fourth quarter of 1996.  The West
Bridgewater facility processed over 14.5 million shipments in 1997 and has the
capacity to process approximately 25% more shipments before any capital
expansion of the center will be required.

     DELIVERY.  The Company minimizes order delivery costs through careful
management of its shipping techniques.  For example, third and fourth class
mailing costs, which accounted for approximately 73% and 88% of orders shipped
from the Indianapolis facility and the West Bridgewater facility, respectively,
in fiscal 1997, are managed to obtain the benefits of various mailing rate
discount programs offered by the United States Postal Service ("USPS").  The
Company sorts packages by zip code, prints the zip bar codes and automatically
calculates the weight of each parcel to be shipped to determine if discounted
bulk rate postage may be available.  The Company believes that the volume of its
mailings provides it with a competitive advantage over smaller catalog retailers
who cannot take full advantage of this rate structure.  The Company also reduces
order shipping costs by sorting and sending packages by truck to up to 21 USPS
drop points around the country, where the packages enter the USPS

                                       8
<PAGE>
 
system for delivery to customers.  In addition to third class and fourth class
mail delivery, the Company offers United Parcel Service ("UPS") delivery and UPS
Express Delivery.

     CATALOG PRODUCTION.  The Company closely manages the catalog production
process to control printing and mailing costs while maintaining attractive and
effective catalog presentations.  The Company has contracts with various
printers which cover its production requirements and afford protection against
certain cost increases.  The Company also employs bulk sorting and drop shipping
of catalogs to take maximum advantage of available USPS rate discounts.

PRIVATE LABEL PURCHASING AND VENDOR RELATIONSHIPS

     The Company emphasizes private label merchandise, which accounted for 83.0%
of Brylane's net sales (excluding the Chadwick's catalog) in fiscal 1997.
Brylane's private label apparel and accessories produce higher gross profit
margins than the national brand merchandise found in its catalogs.  The emphasis
on private label merchandise also affords Brylane greater control over the
manufacturing process, allowing it to achieve its objective of consistency of
quality and fit in the various merchandise categories offered, and enabling it
to offer a greater number of sizes, styles and colors than its competitors.  The
Company believes this approach both increases customer loyalty and confidence in
making a purchase and reduces merchandise returns.  While Chadwick's also
benefits from private label merchandise offerings, it offers a significantly
larger percentage of nationally recognized brand name merchandise.  Chadwick's
private label merchandise accounted for approximately 53% of Chadwick's net
sales in fiscal 1997.  The Company's private label merchandise is sourced from a
diverse group of established vendors who work directly with the Company's buyers
and are provided with rigorous design specifications and quality control
procedures.  The Company is the major customer of and has long-standing
relationships with many of its private label and national brand vendors,
resulting in close and cooperative working relationships and enabling the
Company to obtain merchandise at favorable prices.  Brylane's 10 largest vendors
accounted for 21.3% of purchased merchandise in fiscal 1997.  No single
supplier, however, accounted for more than 4.7% of merchandise purchased in
fiscal 1997.  Brylane's purchases from foreign suppliers accounted for 30.3% of
merchandise purchased in fiscal 1997.

     To ensure the distinct merchandising focus of its catalogs, the Company
conducts purchasing separately for its Chadwick's, Lane Bryant, Roaman's, Lerner
and KingSize catalogs and, within each catalog, has dedicated buyers for
specific product lines.  The Company's merchandising staff actively monitors the
apparel markets and offerings by other catalog and retail stores in an effort to
ensure that the Company's offerings are competitive in design and price.  To
improve purchasing efficiency, the Company also relies on "pre-mailing" programs
(i.e., limited catalog distribution prior to the start of a selling season) to
test customer acceptance of new product offerings.

INVENTORY MANAGEMENT

     The Company's inventory management systems are designed to maintain
inventory levels that provide optimum in-stock positions, while maximizing
inventory turnover rates and minimizing the amount of unsold merchandise at the
end of each season.  The Company maintains higher inventory levels for basic
apparel items which are not generally fashion sensitive.  Inventory levels for
items with greater fashion risk are maintained at lower levels, with the goal of
selling all such merchandise prior to the end of a season.  The Company's
disciplined inventory control systems enable it to maintain minimum inventory
levels, which the Company is able to replenish quickly as a result of its close
relationships with its domestic suppliers.  These lower levels of inventory
enable the Company to avoid excessive markdowns and to reduce its losses on
overstocks at the end of each selling season.  When overstocks do occur, Brylane
is generally successful in selling the goods through relationships it has
established with merchandise brokers (who then resell such merchandise to
retailers) and with discount retailers.  Chadwick's historically has been
successful in selling its overstock through its twice-yearly, end-of-season
clearance catalogs, through its retail outlet stores located in Nashua, New
Hampshire and Brockton, Massachusetts, and to TJX and other third parties.  In
addition, in connection with the Chadwick's Acquisition, the Partnership has
entered into an inventory purchase agreement with TJX pursuant to which TJX has
committed to purchase certain amounts of Chadwick's excess inventory through
January 2000.

                                       9
<PAGE>
 
     Despite its careful inventory management, the Company experiences out-of-
stock and back order inventory conditions, both of which are common in catalog
retailing.  As a result, the Company experiences some order cancellations.
During fiscal 1995, 1996 and 1997, cancellations were 5.1%, 5.7% and 7.8%,
respectively, of the total dollar value of orders received.

MANAGEMENT INFORMATION SYSTEMS

     Brylane's management information systems provide support to all segments of
its operations, including merchandising, marketing, telemarketing, fulfillment,
customer service, financial reporting and inventory management.  Chadwick's
management information systems are currently supported by TJX's mainframe
computer.  In connection with the Chadwick's Acquisition, Brylane entered into a
services agreement with TJX whereby TJX agreed to provide services relating to
the Chadwick's business for approximately three years.  During this period, the
Company will evaluate alternative sources for these services, including
transferring certain of the functions to Brylane and having Chadwick's perform
certain of the functions itself.

     Brylane's management information systems are supported by an IBM mainframe
computer that processes up to 85 million transactions per month.  This computer
is connected to approximately 2,350 terminals between Brylane's three
telemarketing facilities and its New York and Hingham, Massachusetts offices.
See "Item 2. Properties".

SEARS AGREEMENT

     In March 1994, Brylane entered into an exclusive licensing agreement with
Sears (as amended, the "Sears Agreement") to produce a special size women's
apparel catalog (Woman's View), based on Brylane's Lane Bryant and Roaman's
catalogs, for distribution to customers of Sears, Roebuck and Co.  Brylane has
also been mailing catalogs based on Brylane's Lerner catalog (Smart Choice)
since the first quarter of 1994, and the Sue Brett catalog (Classics) since the
third quarter of 1994, to these customers.  In October 1995, in connection with
the KingSize Acquisition, Brylane and Sears expanded the Sears Agreement to
include an exclusive license to produce and distribute the Sears Big & Tall
catalog, based on Brylane's KingSize catalog, to customers of Sears, Roebuck and
Co.  The Woman's View, Smart Choice and Big & Tall catalogs are currently being
mailed to individuals who are not existing customers of Brylane and who are
included in the more than 30 million name customer file of Sears, Roebuck and
Co.

     As amended, the initial term of the Sears Agreement continues through July
31, 2001.  The Sears Agreement can be renewed by the parties for additional one
year terms thereafter; provided, that the Company and Sears may terminate the
agreement upon twelve months' and eighteen months' notice, respectively, prior
to the end of the initial term or any renewal thereof.  Under the Sears
Agreement, the catalogs mailed are substantially similar to Brylane's comparable
catalogs, but have a Sears logo and a different name.  The merchandise is
identical to that contained in Brylane's comparable catalogs, which allows
Brylane to fill incremental customer orders by increasing the amount of
merchandise that it purchases, rather than increasing the number of different
kinds of merchandise categories that it keeps in inventory.  This approach
limits Brylane's incremental inventory risk.  Customers' calls are answered by
telemarketing representatives using the Sears Shop At Home name for the women's
and men's apparel catalogs, and customers can pay for their purchases using a
Sears credit card or various bank credit cards.  Brylane performs all
merchandising, fulfillment, telemarketing and management information functions
through its existing facilities.  In the event that the Sears Agreement
terminates, Brylane will retain the names of all customers who have purchased
through the Sears catalogs covered by such agreement and, at that point, Brylane
will be able to mail Brylane's other catalogs to these customers.

COMPETITION

     The retail apparel business is highly competitive.  Lane Bryant, Roaman's
and Woman's View compete in the sale of special size women's apparel primarily
with other mail order companies, department stores and specialty retailers,
including the Lane Bryant retail stores operated by The Limited, Catherines
Stores and United Retail Group (which is partially owned by The Limited).
Brylane's principal competitors in the mail order retailing of special size
women's apparel include J.C. Penney (general catalog and Liz Baker), Arizona
Mail Order (Old

                                       10
<PAGE>
 
Pueblo and Regalia), Blair and Hanover Direct (Silhouettes).  Chadwick's, Lerner
and Smart Choice compete in the sale of value-priced women's fashion sportswear
with many other mail order companies, specialty retailers, discount stores and
department stores, including the Lerner retail stores operated by The Limited
and T.J. Maxx and Marshalls, each of which is owned by TJX.  KingSize and Big &
Tall compete in the sale of special size men's apparel with specialty retailers
(including Casual Male and Repp Stores), department stores, other mail order
companies (including Blair as well as the J.C. Penney catalog and Phoenix Big &
Tall catalogs) and discount stores.  In addition, sales of clothing through home
television shopping networks or other electronic media could provide additional
sources of competition for the Company.  The Company does not believe that it
has any significant competition in the special size or off-price segment of the
women's apparel catalog retail market.  However, there can be no assurance that
other retailers of apparel will not decide to enter into the Company's markets.

     The Company competes on the basis of its extensive merchandise selection,
product quality and price, credit extension and customer service.  The Company
believes that its long-standing relationship with many of its customers,
reputation for quality merchandise, extensive customer files and low-cost,
efficient infrastructure allow it to compete effectively in all of its other
market segments.  See "Risk Factors--Competition and Other Business Factors".

     As a result of the PPR Stock Purchase, certain noncompetition and
nonsolicitation provisions previously contained in the Transaction Agreement
pursuant to which affiliates of FS&Co. and The Limited formed the Partnership
(the "Transaction Agreement"), and that were binding upon The Limited, have
terminated, and The Limited can now compete directly with Brylane in the retail
catalog business for special size women's apparel.  However, the Company
continues to retain the use in connection with its business of the Lane
Bryant(R), Lerner(R) and other trademarks licensed to it by The Limited pursuant
to the terms of the Trademark Agreement, as specified further therein.  See "--
Trademarks, Trade Names and Licenses" and "Risk Factors--Competition and Other
Business Factors".

     In addition, pursuant to that certain Asset Purchase Agreement dated
October 18, 1996 by and among TJX, Chadwick's, Inc. and Brylane (the "Chadwick's
Purchase Agreement"), TJX agreed, for a period of five years, to not own or
conduct (with an exception for passive ownership of less than 10% of a company)
any business that sells merchandise through printed women's or men's apparel
catalogs which are substantially similar to the "Chadwick's of Boston" catalog.
TJX is permitted, however, (i) to sell merchandise through the Internet and
other electronic media, (ii) to use print advertising for apparel and
merchandise sold through stores and electronic media even if such items may be
purchased by mail or telephone, and (iii) to print catalogs in which less than
10% of the merchandise is men's or women's apparel.  Also, TJX may acquire a
company that conducts a competitive business if such competitive business
accounts for less than 25% of such acquired company's annual revenues and TJX
uses its commercially reasonable efforts to divest itself within one to two
years of such acquisition of any competitive business which accounts for more
than 5% of the annual revenues of such acquired company.

TRADEMARKS, TRADE NAMES AND LICENSES

     The Company is the owner in the United States of the Roaman's, Sue Brett,
KingSize, Chadwick's, Chadwick's of Boston, Ltd., Bridgewater, Jessica London
and Brett trademarks, as well as certain other trademarks which it uses as
private label brand names.  In connection with the Brylane Acquisition, Brylane
became a party to a trademark license agreement with The Limited and certain of
its affiliates (the "Licensors") (as amended, the "Trademark Agreement")
pursuant to which Brylane uses the Lane Bryant and Lerner registered trademarks,
as well as certain other trademarks used as private label brand names
(collectively, the "Trademarks"), under a royalty-free license from The Limited
(the "License").

     The Partnership may assign the Trademark Agreement and the License without
the consent of The Limited (i) to the purchaser of all or substantially all of
the assets of the Lane Bryant, Roaman's and Lerner catalog businesses operated
by the Company (the "Business") or (ii) to any corporation which is a successor
to the Partnership or any successor thereto.  The Trademark Agreement will
terminate on the earliest to occur of the following:  (i) October 20, 2007
(March 31, 1999 for use in connection with men's wear) (ii) two years after any
person which competes with any retail or catalog business conducted by The
Limited or its affiliates as of August 20, 1993 acquires control of the
Business, and (iii) if the Company is party to a business combination voted
against

                                       11
<PAGE>
 
by The Limited or any of its affiliates, (A) two years after such event (or ten
years after such event if The Limited has sold either of its Lane Bryant or
Lerner retail businesses prior to such event with respect to the Trademarks used
in the businesses sold by The Limited) if the other party in such combination
competes with The Limited or any of its affiliates or (B) four years after such
event (or ten years after such event if The Limited has sold either of its Lane
Bryant or Lerner retail businesses prior to such event with respect to the
Trademarks used in the businesses sold by The Limited) in any other
circumstance.  The Trademark Agreement may also be terminated (a) by The Limited
(i) upon 30 days' notice upon a material breach of the Trademark Agreement by
Brylane which breach remains uncured or (ii) upon the bankruptcy or insolvency
of Brylane, and (b) by the Company, upon six months' notice on or after August
20, 1998.  See "Risk Factors--Relationship with The Limited".

     In addition to the Trademark Agreement, the Partnership became a party to
an Electronic Media Trademark License Agreement pursuant to which the Licensors
granted to the Partnership a non-exclusive right, permission and privilege to
use the Trademarks in connection with the promotion, distribution and sale of
special size women's apparel, moderately priced fashion apparel and related
accessories through television and other electronic media, subject to prior
reasonable determination by The Limited that any proposed electronic marketing
activity would not disparage or diminish the stature, image or quality of such
Trademarks or cause confusion or deception among Lerner or Lane Bryant retail
customers.

     Brylane uses the Woman's View, Smart Choice and Big & Tall trademarks
pursuant to the licensing arrangements contained in the Sears Agreement.  See 
"--Sears Agreement".  In addition, the Company also licenses certain other marks
from TJX and other third parties.  While certain of these licensed names are
important to the Company's business, management does not believe that the loss
of any of the marks licensed from TJX would have a material adverse effect upon
the Company's business, financial condition and results of operations.

     The Company uses the Lane Bryant, Lerner, Woman's View, Smart Choice, Big &
Tall, Chadwick's, Chadwick's of Boston, Ltd., Bridgewater, Jessica London and
Brett trademarks, and the Classics name, only on the covers of its catalogs and
in general advertising and promotional materials, and not as labels or tags on
any garments or other merchandise it distributes.  The Company's other owned and
licensed trademarks, including Sue Brett, KingSize, Peak Performance, Hunters
Run, David Benjamin, Lasting Comfort, Forenza, Venezia, Savannah, Fads, JL Plum
and Stephanie Andrews, are used for certain of the Company's apparel offerings,
as well as in other marketing and merchandising activities.  Such trademarks are
important to the operations of the Company.  See "Risk Factors--Relationship
with The Limited".

ASSOCIATES

     The Company's skilled and dedicated associates are a key resource.  At
January 31, 1998, the Company employed (directly or indirectly through its
subsidiaries) approximately 6,400 individuals, including part-time and full-time
associates.  During peak sales periods, the Company hires approximately 1,200
additional part-time and temporary associates.  Approximately 1,400 of
Chadwick's associates are covered under one of TJX's collective bargaining
agreements with the Union of Needletrades, Industrial and Textile Employees.
This agreement expires on December 31, 2000.  The Company considers its labor
relations and overall employee relations to be good.

REGULATORY MATTERS

     The Company currently collects sales and use tax on merchandise sales in
the states of Indiana, Maryland, Massachusetts, New York and Texas because the
Partnership has physical presence in those states.  Prior to June 30, 1996, the
Partnership collected applicable sales and use taxes in approximately 41 states,
regardless of whether the Partnership was otherwise required to collect such
taxes in those states, generally pursuant to a Multistate Sales Tax Agreement,
dated as of January 1, 1988, among the Partnership, the Multistate Tax
Commission and a consortium of 35 states represented by the Multistate Tax
Commission, which governed the Brylane business when it was acquired by the
Partnership.  In March 1996, the Partnership advised the Multistate Tax
Commission, based on advice received from legal counsel, that it was not
extending the Multistate Sales Tax Agreement beyond its expiration date of June
30, 1996.  Based upon present law, the Company believes that it is not generally
required to collect and remit sales and use taxes on merchandise sold in states
in which it does not have a physical presence, absent the Multistate Sales Tax
Agreement.  It is possible that there may be a judicial

                                       12
<PAGE>
 
decision or that Congress may pass legislation in the future permitting states
in which the Company does not have a physical presence to require it to collect
and remit sales and use taxes with respect to sales in such states.
Accordingly, there can be no assurance that the Company will not have an
obligation to collect and remit sales and use taxes in states in addition to
those states in which it is presently required to collect and remit such taxes.

     The Company's business, and the direct mail industry in general, is subject
to regulation by a variety of state and federal laws and regulations related to,
among other things, advertising, offering and extending credit, imports and
sales tax.  Legislation has been proposed in the past designed to impose a
ceiling on the rates charged in connection with the extension of credit through
credit cards.  It is impossible to predict whether such legislation will be
enacted and, if enacted, what form it will take.  However, any such legislation
could have an adverse impact on the Company's credit card financing
arrangements.  The Company's imported products are subject to United States
customs duties, and some of the Company's imported products are subject to
import quotas when imported from particular countries.  In the ordinary course
of its business, the Company may from time to time be subject to claims for
duties, and the Company's imported products may be subject to other import
restrictions.  United States customs duties currently are between 0% and 48.0%
(with an average rate of 15.3%) of appraised value on certain items of
inventory.  During fiscal 1997, Brylane made approximately 30.3% of its
merchandise purchases from foreign suppliers.  See "Risk Factors--Dependence on
Suppliers; Foreign Sourcing".

                                  RISK FACTORS

     The following risk factors should be carefully reviewed in addition to the
other information contained in this Annual Report on Form 10-K.

COMPETITION AND OTHER BUSINESS FACTORS

     The retail apparel business is highly competitive.  Each of the Company's
women's catalogs compete in the sale of women's apparel with other catalog
retailers, department stores, discount stores and specialty retailers.  In
particular, Lane Bryant, Roaman's, Jessica London and Woman's View compete in
the sale of special size women's apparel with the Lane Bryant retail stores
operated by The Limited, and Lerner and Smart Choice compete in the sale of
women's sportswear and other apparel with the Lerner retail stores operated by
The Limited.  Chadwick's competes with many retail sellers of apparel, including
T.J. Maxx and Marshalls, each of which is owned by TJX.  The Company's KingSize
and Big & Tall catalogs compete in the sale of special size men's apparel with
specialty retailers, department stores, other mail order companies and discount
stores.  In addition, sales of clothing through home television shopping
networks or other electronic media could provide additional sources of
competition for Brylane in the future.  Some of the Company's competitors may
have greater financial resources than the Company.  An increase in the amount of
competition faced by the Company could have a material adverse effect on the
Company's business, financial condition and results of operations.  See "Item 1.
Business--Competition".

     The Company's future performance will be subject to a number of other
factors beyond its control, including declines in discretionary consumer
spending or in demand for apparel generally, which could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, although the Company believes that its strategy of providing a
broad range of basic merchandise that is current, but not "leading edge", limits
fashion risk, it is still subject to risks associated with changes in fashion
preferences.  Misjudgment by the Company as to fashion trends or consumer
preferences, or a downturn in discretionary consumer spending, could have a
material adverse effect on the Company's business, financial condition and
results of operations.

     The Company benefits from the name recognition and reputation generated by
the Lane Bryant retail stores and the Lerner retail stores which are operated by
The Limited.  At present, The Limited operates over 775 Lane Bryant stores and
over 725 Lerner stores.  The Limited is under no obligation to continue to own
or operate the Lane Bryant and Lerner stores, and there can be no assurance that
The Limited will not change the focus of such stores in a manner that would be
adverse to Brylane's catalog concepts bearing the same trademarks, although The
Limited has agreed that, during the term of the Trademark Agreement (as defined
herein), it will not disparage or diminish the stature, image or quality of any
of the trademarks subject to the Trademark Agreement.

                                       13
<PAGE>
 
     The Transaction Agreement pursuant to which affiliates of FS&Co. and The
Limited formed the Partnership (as amended, the "Transaction Agreement")
contained certain noncompetition and nonsolicitation provisions pursuant to
which The Limited agreed, in general, and subject to certain exceptions, not to
compete with Brylane's catalog business for special size women's apparel by
publishing similar catalogs, or to solicit any person who is an employee of such
business to terminate his or her relationship with Brylane.  These provisions
terminated as a result of the PPR Stock Purchase.  Consequently, The Limited can
now compete directly with Brylane in the retail catalog business for special
size women's apparel.  However, the Company has continued to retain the use in
connection with its business of the Lane Bryant(R), Lerner(R) and other
trademarks licensed to it by The Limited pursuant to the terms of the Trademark
Agreement (as defined), as specified further therein.  There can be no assurance
that such competition will not have a material adverse effect on Brylane.  See
"Business--Trademarks, Tradename and Licenses" and "--Relationship with The
Limited".

RELATIONSHIP WITH THE LIMITED

     In connection with the Brylane Acquisition, Brylane became a party to a
trademark license agreement with The Limited (as amended, the "Trademark
Agreement") pursuant to which the Company has use of the Lane Bryant(R),
Lerner(R) and certain other trademarks, on a royalty-free basis, until October
20, 2007 (except in connection with the use of the trademarks on men's wear, for
which the termination date is March 31, 1999), subject to earlier  termination
as described in the paragraphs that follow.  The Company has determined to use
the Lane Bryant(R) and Lerner(R) trademarks in its catalogs and in general
advertising and promotional materials, and not as labels or tags on any garments
or other merchandise it distributes.  The other trademarks covered by the
Trademark Agreement are used for certain of the Company's apparel offerings, as
well as other marketing and merchandising activities.

     The Trademark Agreement and each of the licenses granted thereunder will
terminate on October 20, 2007 (March 31, 1999 for use in connection with men's
wear), unless earlier terminated by (i) the Company with six months' notice on
or after August 20, 1998, (ii) The Limited in the event of (x) a breach by the
Company of any of its material obligations under the Trademark Agreement or  (y)
certain bankruptcy or insolvency events involving the Company, or (iii) subject
to certain extensions, (x) two years after any competitor of The Limited
acquires "control" of the Lane Bryant, Roaman's and Lerner catalog businesses
operated by the Company, or (y) two or four years after the occurrence of
certain mergers, consolidations or business combinations.  See "Business--
Trademarks, Tradename and Licenses".

     Unless renewed, upon a termination of the Trademark Agreement, the Company
would need to create new names and trademarks for its catalogs using the
licensed trademarks, as well as for the merchandise offerings that currently
utilize the licensed trademarks, and effect a transition of customer recognition
and acceptance of such new names and trademarks.  While the Company believes
that the termination provisions of the Trademark Agreement would afford it
sufficient time to achieve this transition, no assurance can be given that it
would be successful or that the termination of the Trademark Agreement would not
have a material adverse effect on the Company.

LEVERAGE AND CERTAIN RESTRICTIONS IMPOSED BY LENDERS

     As of January 31, 1998, after giving effect to the Common Stock Repurchase,
the Company had total outstanding indebtedness of $358.8 million, as compared
with total stockholders' equity of $155.0 million.  The Company will require
substantial cash to fund scheduled payments of principal and interest on its
outstanding indebtedness as well as any increased working capital requirements.
The Company will be restricted in its ability to incur debt, make distributions
(including cash dividends), incur liens, make capital expenditures and make
investments or acquisitions by the terms of both the Amended 1997 Bank Credit
Facility as well as the indenture (the "Indenture") that currently governs the
Company's Senior Subordinated Notes (the "Senior Subordinated Notes").  As a
result of these restrictions, the ability of the Company to secure additional
financing, if needed, is constrained, and the Company may be prevented from
engaging in transactions that might otherwise be considered beneficial to the
Company.  See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources".

                                       14
<PAGE>
 
SEARS AGREEMENT

     In March 1994, Brylane entered into the Sears Agreement which, as amended,
provides the Company with an exclusive license to distribute its Woman's View,
Smart Choice, Classics and Big & Tall catalogs to customers selected by the
Company from the more than 30 million name customer file of Sears, Roebuck and
Co. (as amended, the "Sears Agreement").  As amended, the initial term of the
Sears Agreement expires on July 31, 2001 and automatically continues for
additional one-year terms thereafter; provided, that the Company and Sears may
terminate the Sears Agreement upon twelve months' and eighteen months' written
notice, respectively, prior to the end of the initial term or any renewal
thereof.  In addition, upon the default of either Sears or the Company, the
Sears Agreement may be terminated by the non-defaulting party either immediately
or upon the payment of all sums owed by such non-defaulting party under the
Sears Agreement, depending on the type of default.  Events of default under the
Sears Agreement include, among others, (i) the material failure of the Company
to comply with the operating policies and procedures set forth in the Sears
Agreement; (ii) the material failure of the Company to actively follow any
mutually agreed upon circulation and mailing plan; (iii) any bankruptcy or
insolvency proceedings being commenced against either party; and (iv) the
inability of either party to pay debts as they come due.

     A termination of the Sears Agreement could have a material adverse effect
on the Company's business, financial condition and results of operations.  Upon
termination of the Sears Agreement, the Company will retain the names of all
customers who have purchased through the Sears catalogs covered by such
agreement and, at that point, the Company will be able to mail the Company's
other catalogs to these customers.  However, no assurance can be given as to the
extent that the Company will be able to retain these individuals as customers of
the Company.  See "Item 1. Business--Sears Agreement".

IMPACT OF INCREASES IN COSTS OF POSTAGE, PAPER AND PRINTING

     Increases in postal rates and paper and printing costs have a direct impact
on the cost of the production and mailing of the Company's catalogs and
promotional materials, as well as the Company's order fulfillment.  Like others
in the catalog industry, the Company passes on a significant portion of the
costs of order fulfillment directly to its customers, but it does not directly
pass on the costs of preparing and mailing catalogs and other promotional
materials.  The Company relies heavily on discounts from the basic postal rate
structure, such as discounts for bulk mailings and pre-sorting by zip code and
carrier routes.  Brylane and Chadwick's historically have not entered into long-
term contracts for their paper purchases.  Consequently, no assurances can be
given that the Company will not be subject to increases in paper costs or to
shortages in the supply of paper in the future.  Over the last several months
paper prices have generally increased within the range anticipated by the
Company.  In addition, the Company believes that paper prices will increase in
the first half of fiscal 1998 and the increase should be in a range anticipated
by the Company.  In addition, although the Company currently has contracts for
printing of its catalogs, the remaining terms of these contracts range from one
to five years, and no assurance can be given that the Company's printing costs
will not increase upon renegotiation of these contracts.  Significant increases
in postal rates or in paper or printing costs could have a material adverse
effect on the Company's business, financial condition and results of operations,
particularly to the extent that the Company is unable to pass on such increases
directly to its customers or to offset such increases by either raising prices
or reducing other costs.  Brylane and Chadwick's each experienced an increase in
postal rates in January 1995 and an increase in paper costs from the fall of
1994 through the fall of 1995.  While Brylane and Chadwick's were able to
partially mitigate these cost increases, no assurances can be given that similar
increases in postal rates or in the Company's costs of paper will not occur in
the future.  In particular, the Company believes that a postal rate increase
within the next twelve months is likely.  See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations".

CONTROL OF THE COMPANY

     PPR beneficially owns approximately 44% of the Company.  By virtue of its
ownership of a large percentage of the outstanding Common Stock, PPR is in a
position to exercise substantial influence over actions that require the consent
of stockholders.  In addition, pursuant to the terms of the Governance
Agreement, the Company has agreed to use its best efforts to have the Board of
Directors of the Company include up to five nominees of PPR in the slate of
nominees presented by the Board of Directors for election at each stockholder
meeting at which

                                       15
<PAGE>
 
directors are to be elected.  The number of directors that PPR may nominate
declines with its percentage of Common Stock.

DEPENDENCE ON SUPPLIERS; FOREIGN SOURCING

     Brylane's concentration on private label merchandise in its special size
catalogs, and the broad range of merchandise offered in its Chadwick's catalogs,
requires that the Company maintain good relationships with many manufacturing
sources and suppliers.  Moreover, the number of available manufacturers and
suppliers for special size apparel is more limited when compared with the number
available for apparel generally.  Although the Company believes that it has
established excellent relationships with its principal manufacturing sources and
suppliers, the Company does not have long-term contracts, and its future success
will depend in some measure upon its ability to maintain such relationships.
The inability of the Company to source quality goods in a timely fashion at
favorable prices could have a material adverse effect on the Company's business,
financial condition and results of operations.

     In fiscal 1997, Brylane made approximately 30.3% of its merchandise
purchases from foreign suppliers.  Although all of the Company's foreign
purchases are denominated in U.S. dollars, the Company is subject to a number of
risks which are beyond its control, including currency and exchange risks,
changes in duties, quotas or other import restrictions, the imposition of taxes
or other charges on imports, disruptions or delays in shipments and
transportation, political instability, and labor disputes and strikes.  There
can be no assurance that the occurrence of any destabilizing event abroad will
not have a material adverse effect on the Company's business, financial
condition and results of operations.  See "Item 1. Business--Private Label
Purchasing and Vendor Relationships" and "Item 1. Business--Regulatory Matters".

RISKS GENERALLY ASSOCIATED WITH ACQUISITIONS

     An element of the Company's growth strategy is to pursue strategic
acquisitions that either expand or complement the Company's business.
Acquisitions involve a number of special risks, including the diversion of
management's attention to the assimilation of the operations and the
assimilation and retention of the personnel of the acquired companies, and
potential adverse short-term effects on the Company's operating results.  In
addition, the Company may require additional debt or equity financing for future
acquisitions, which may not be available on terms favorable to the Company, if
at all.  The inability of the Company to successfully finance, complete and
integrate strategic acquisitions in a timely manner could have an adverse impact
on the Company's ability to effect a portion of its growth strategy.

RISK OF DISASTER

     The Company conducts its fulfillment operations from facilities located in
Indianapolis, Indiana and West Bridgewater, Massachusetts.  If a disaster (such
as a tornado or fire) were to destroy or significantly damage either of these
facilities, the Company would need to obtain alternative facilities from which
to conduct its fulfillment operations and would need to replenish its inventory,
both of which would result in significantly increased operating costs and
significant delays in the fulfillment of customer orders.  While the Company
maintains business interruption insurance, such increased costs or delays would
have a material adverse effect on the Company's business, financial condition
and results of operations.

RISKS RELATED TO UNIONIZED EMPLOYEES

     At January 31, 1998, the Company had approximately 6,400 associates,
including approximately 1,400 associates of Chadwick's who were members of a
labor union.  The Company's agreement with such labor union expires on December
31, 2000.  If unionized associates were to engage in a strike or other work
stoppage or if additional associates were to become unionized, the Company could
experience a significant disruption of operations and higher labor costs, all of
which could have a material adverse effect on the Company's business, financial
condition and results of operations.

                                       16
<PAGE>
 
ITEM 2.  PROPERTIES

     The principal executive offices of the Company are located in New York, New
York in approximately 90,000 square feet of leased office space.  The Company
owns its 750,000 square foot fulfillment and telemarketing center located on
approximately 26 acres of land in Indianapolis, Indiana.  Recently, the Company
leased an additional 125,000 square feet of warehouse space in Plainfield,
Indiana.  The Company also leases approximately 73,000 square feet in San
Antonio, Texas, and approximately 13,400 square feet in Greenwood, Indiana, for
telemarketing operations related to the Brylane catalogs.  The executive offices
of the Company's KingSize operations, currently occupying approximately 8,000
square feet of leased office space, were moved in April 1998 from Hingham,
Massachusetts to New York, New York.  In addition, the executive offices,
telemarketing center, warehouse and fulfillment center of the Company's
Chadwick's operations are located in a Company-owned facility in West
Bridgewater, Massachusetts that contains approximately 580,000 square feet of
space.  The Company leases an additional 126,000 square foot facility in West
Bridgewater, Massachusetts for returns processing and customer service related
to Chadwick's.  The Company has recently entered into a lease for a 330,000
square foot facility to be constructed in Taunton, Massachusetts that the
Company will use for returns processing and customer service related to
Chadwick's and that will replace the 126,000 square foot West Bridgewater
facility.  The Company took possession of the Taunton facility immediately upon
its completion, which occurred in Spring 1998.  As of April 14, 1998, the
Company also leases from TJX approximately 11,000 square feet and 12,500 square
feet of retail space for Chadwick's outlet stores in Brockton, Massachusetts and
Nashua, New Hampshire, respectively, and has an arrangement with TJX whereby it
has access to use a 7,500 square foot buying office located in New York, New
York.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is a party to litigation in the ordinary course of business.
The Company does not believe that unfavorable outcomes in such litigation would
have a material adverse effect on its business, financial condition and results
of operations.

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

     Not applicable.

                                       17
<PAGE>
 
                                    PART II

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

     The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "BYL" and began trading on February 21, 1997.  The following table
sets forth, for the periods indicated, the high and low closing prices for the
Common Stock as reported on the New York Stock Exchange.

<TABLE>
<CAPTION>
                                                               HIGH        LOW
                                                          -----------------------
<S>                                                          <C>        <C>
1997:
            First Quarter (beginning February 21, 1997)...    $29.3750   $21.2500
            Second Quarter................................     39.5000    26.5000
            Third Quarter.................................     49.3750    37.7500
            Fourth Quarter................................     54.8750    42.0000
1998:
            First Quarter (through April 16, 1998)........    $61.1250   $49.4375
</TABLE>

     The closing price of the Common Stock on April 16, 1998 was $59.00 per
share.  As of April 16, 1998, there were approximately 118 holders of the
Company's Common Stock named as holders of record by ChaseMellon Shareholder
Services, L.L.C., the Company's registrar and transfer agent.

     Although the Partnership has made tax distributions to its partners, the
Company has never declared or paid a cash dividend on the Common Stock.  The
Company anticipates that all of its earnings in the foreseeable future will be
used for the repayment of indebtedness and for the development and expansion of
its business and, therefore, does not anticipate paying dividends on the Common
Stock in the foreseeable future.  The Partnership is restricted in its ability
to make distributions that would enable the Company to pay dividends on the
Common Stock by the terms of both the Indenture and the Amended 1997 Bank Credit
Facility.  See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources".  At
January 31, 1998, the Partnership could not have made any such distribution to
the Company by virtue of the restrictions contained in the Amended 1997 Bank
Credit Facility.  Any determination to pay cash dividends in the future will be
at the discretion of the Board of Directors of the Company and will be
dependent, among other things, upon the Company's results of operations and
financial condition, contractual restrictions, and other factors deemed relevant
at that time.

RECENT SALES OF UNREGISTERED SECURITIES

     On February 26, 1997, in connection with the closing of the Exchange
Transaction, (i) M&P Distributing Company, an affiliate of The Limited (the
"Limited Stockholder"), WearGuard, Leeway & Co. and NYNEX received shares of
Common Stock in exchange for their interests in the Partnership; (ii)
Chadwick's, Inc., a wholly-owned subsidiary of TJX ("Chadwick's, Inc." or the
"TJX Noteholder"), received from the Company the substitute Convertible
Subordinated Note Due 2006 issued by Brylane Inc., and the Partnership (the
"Convertible Note") on substantially the same terms and conditions as the
Partnership Note (as defined herein); (iii) certain affiliates of FS&Co. (FS
Equity Partners II, L.P. ("FSEP II"), FS Equity Partners III, L.P. ("FSEP III"),
and FS Equity Partners International, L.P. ("FSEP International")), and Mr.
Sodini and Ms. Bourneuf received shares of Common Stock in exchange for their
shares of common stock of VP Holding; (iv) the officer and director holders of
shares of common stock of VP Holding received shares of Common Stock pursuant to
the Brylane Subscription Plan (as defined herein) or the Senior Management Plan
(as defined herein); and (v) Mr. Rao and Ms. Meyrowitz received shares of Series
A Preferred Stock (as defined herein) in exchange for their shares of VP Holding
Preferred Stock.  Such exchanges were on a one-to-one basis.  Since each of the
holders of the shares of common stock and preferred stock of VP Holding, the
interests in the Partnership and the Convertible Subordinated Note Due 2006 in
the original principal amount of $20.0 million (bearing interest at an initial
rate of 6%) issued by the Partnership to the TJX Noteholder in connection with
the Chadwick's Acquisition (the "Partnership Note") agreed at the time of their
respective original acquisitions of their shares or partnership interests or
Partnership Note to exchange their shares,

                                       18
<PAGE>
 
partnership interests or Partnership Note for shares of Common Stock or the
Convertible Note, as the case may be, in connection with the Exchange
Transaction, the Company believes that none of the foregoing transactions
involved a "sale" within the meaning of the Securities Act.  Such exchanges
would also be exempt from registration under the Securities Act pursuant to
Section 4(2) of the Securities Act.  No underwriter participated in the
transaction.  The Series A Preferred Stock is convertible into shares of Common
Stock on a one-to-one basis.  The shares of Series A Preferred Stock "vest" or
become convertible in three equal annual installments commencing December 9,
1997, as long as Mr. Rao or Ms. Meyrowitz, as applicable, remain employed by
Brylane (subject to certain accelerating events).  On December 9, 1999, "vested"
shares will, at the option of the holders thereof, either be redeemed by the
Company for $20.00 per share (subject to adjustment for stock splits, dividends
or reclassifications) or converted into one share of Common Stock (subject to
adjustment for stock splits, dividends or reclassifications).  In the event of a
"change of control" (as defined in Brylane Inc.'s Certificate of Designation of
the Series A Preferred Stock) each "vested" share, at the option of the holder
thereof, may be redeemed for $20.00 per share or converted into one share of
Common Stock, while "unvested" shares must be redeemed for $20.00 per share.
The Convertible Note is convertible at any time, in whole or in part, at the
option of the TJX Noteholder into a total of 727,273 shares of Common Stock at a
conversion price of $27.50 per share (subject to adjustment for stock splits and
similar events).  As of April 14, 1998, the entire principal amount of the
Convertible Note had been converted into 727,273 shares at $27.50 per share.

                                       19
<PAGE>
 
ITEM 6.  SELECTED FINANCIAL DATA

     The following table presents certain historical data of Brylane for the
periods indicated.  The balance sheet data as of July 31, 1993, January 29,
1994, January 28, 1995, February 3, 1996 and February 1, 1997, and the
statements of operations data for the twenty-six weeks ended July 31, 1993 and
January 29, 1994, and the fiscal years ended January 28, 1995, February 3, 1996
and February 1, 1997, have been derived from the combined and consolidated
financial statements of the predecessor company of Brylane (the "Predecessor")
and the Partnership, as appropriate.  The balance sheet data at January 31, 1998
and the statements of operations data for the fiscal year ended January 31, 1998
have been derived from the consolidated financial statements of the Company.
The information below should be read in conjunction with the audited financial
statements and related notes thereto included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
                                       PREDECESSOR                               PARTNERSHIP                             COMPANY
                                      -------------    ------------------------------------------------------------    ------------

                                                                                                                       FISCAL YEAR
                                                                                     FISCAL YEAR ENDED                    ENDED
                                                                         ------------------------------------------
                                       TWENTY-SIX        TWENTY-SIX
                                       WEEKS ENDED       WEEKS ENDED      JAN. 28,       FEB. 3,          FEB. 1,         JAN. 31,
                                      JULY 31, 1993     JAN. 29, 1994       1995         1996(1)          1997(2)           1998
                                      -------------    ---------------   ----------    -----------      -----------     -----------
                                                        (IN THOUSANDS, EXCEPT PER UNIT/SHARE DATA)
<S>                                  <C>               <C>               <C>           <C>              <C>            <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.............................     $242,086         $ 247,780      $578,530    $   601,055      $   705,353     $ 1,314,839
Cost of goods sold....................      122,530           124,224       288,217        298,414          346,572         674,324
Non-recurring inventory charge(3).....           --            11,487         2,614            569            1,657           3,315
                                           --------         ---------      --------    -----------      -----------     -----------
Gross margin..........................      119,556           112,069       287,699        302,072          357,124         637,200
Operating expenses:
 Catalog and advertising..............       61,165            66,860       153,830        174,446          186,985         302,232
 Fulfillment..........................       18,335            21,477        41,656         37,333           55,450         124,372
 Support services.....................       12,964            13,377        35,152         37,024           54,422          89,260
 Intangibles and organization cost
   amortization.......................           --             2,121         4,242          4,707            6,518          10,972
                                           --------         ---------      --------    -----------      -----------     -----------
     Total operating expenses.........       92,464           103,835       234,880        253,510          303,375         526,836
                                           --------         ---------      --------    -----------      -----------     -----------
Operating income......................       27,092             8,234        52,819         48,562           53,749         110,364
Interest expense, net.................           --            10,060        19,576         20,624           24,026          27,707
                                           --------         ---------      --------    -----------      -----------     -----------
Income (loss) before income taxes and
  extraordinary charge................       27,092            (1,826)       33,243         27,938           29,723          82,657

Provision for income taxes(4).........       10,600                75            89             88              315          31,545
                                           --------         ---------      --------    -----------      -----------     -----------
Net income (loss) before extraordinary
 charge...............................       16,492            (1,901)       33,154         27,850           29,408          51,112

Extraordinary charge, net of tax(5)...           --                --            --             --            2,456           4,077
                                           --------         ---------      --------    -----------      -----------     -----------
Net income (loss).....................     $ 16,492         $  (1,901)     $ 33,154    $    27,850      $    26,952     $    47,035
                                           ========         =========      ========    ===========      ===========     ===========
                                                                                                (table continued on following page)
</TABLE>

                                       20
<PAGE>
 
<TABLE>
<CAPTION>
                                       PREDECESSOR                               PARTNERSHIP                             COMPANY
                                      -------------    ------------------------------------------------------------    ------------
                                                                                                                       FISCAL YEAR
                                                                                      FISCAL YEAR ENDED                   ENDED
                                                                         ------------------------------------------
                                       TWENTY-SIX        TWENTY-SIX
                                       WEEKS ENDED       WEEKS ENDED      JAN. 28,       FEB. 3,          FEB. 1,        JAN. 31,
                                      JULY 31, 1993     JAN. 29, 1994      1995          1996(1)          1997(2)          1998
                                      -------------    ---------------   -----------   -------------   ------------    ------------
                                                                 (IN THOUSANDS, EXCEPT PER UNIT/SHARE DATA)
<S>                                  <C>               <C>               <C>           <C>              <C>            <C>

SUPPLEMENTAL STATEMENTS
 OF OPERATIONS DATA:
Income (loss) before income taxes and
 extraordinary charge................      $ 27,092         $  (1,826)     $ 33,243    $    27,938      $    29,723     $    82,657

Provision for income taxes(6)........        10,600              (676)       12,300         10,337           10,998          30,996
                                           --------         ---------      --------    -----------      -----------     -----------
Income (loss) before extraordinary
 charge..............................        16,492            (1,150)       20,943         17,601           18,725          51,661

Extraordinary charge, net of related
 taxes...............................            --                --            --             --            1,547           4,077
                                           --------         ---------      --------    -----------      -----------     -----------

Net income (loss)....................      $ 16,492         $  (1,150)     $ 20,943    $    17,601      $    17,178     $    47,584
                                           ========         =========      ========    ===========      ===========     ===========
Supplemental basic earnings per
 unit/share:

 Income per unit/share before
   extraordinary charge..............                                                  $      1.39      $      1.41     $      2.78
 Extraordinary charge per unit/share.                                                           --             0.12            0.22
                                                                                       -----------      -----------     -----------
 Net income per unit/share...........                                                  $      1.39      $      1.29     $      2.56
                                                                                       ===========      ===========     ===========
Supplemental diluted earnings per
  unit/share:

  Income per unit/share before
    extraordinary charge..............                                                 $      1.36      $      1.31     $      2.69
                                                                                                                                   
  Extraordinary charge per unit/share.                                                          --             0.11            0.21
                                                                                       -----------      -----------     -----------
  Net income per unit/share...........                                                 $      1.36      $      1.20     $      2.48
                                                                                       ===========      ===========     ===========
Weighted average unit/shares
 outstanding:
 Basic................................                                                  12,658,144       13,270,220      18,606,048
 Diluted..............................                                                  12,933,969       14,389,835      19,412,973
BALANCE SHEET DATA (END OF PERIOD):
Total assets..........................     $ 95,882         $ 255,051      $286,491    $   327,903      $   705,234     $   720,200
Long-term debt (including current
 portion and revolver)................           --           229,070       214,168        226,740          427,362         358,753
Partnership/Stockholders' equity
 (deficit)............................       42,789           (31,333)        1,777         27,187          103,863         155,038
OPERATING AND OTHER DATA:
EBITDA(7).............................     $ 28,566         $  23,425      $ 62,785    $    57,488      $    69,145     $   135,727
Cash flows from operating activities..       14,059             7,512        39,002         33,562           13,023          66,604
Cash flows from investing activities..         (165)         (295,870)       (5,287)       (60,543)        (233,098)         20,148
Cash flows from financing activities..      (13,894)          298,393       (15,255)         5,955          215,891         (84,954)

</TABLE>

_________________
(1) The fiscal year ended February 3, 1996 was a 53-week period.  All other
    fiscal years shown are 52-week periods.
(2) The Company's financial statements include the results of Chadwick's on a
    consolidated basis from December 9, 1996, the closing date of the Chadwick's
    Acquisition.
(3) The non-recurring inventory charges resulted from increasing inventory by
    $14,101,000 for the Brylane Acquisition, by $569,000 for the KingSize
    Acquisition and by $4,972,000 for the Chadwick's Acquisition to reflect the
    fair market value of the inventory at the respective acquisition dates, as
    more fully described in "Item 7.  Management's Discussion and Analysis of
    Financial Condition and Results of Operations".  The increases in inventory
    value had been fully amortized into cost of goods sold as of April 30, 1994
    for the Brylane Acquisition, as of February 3, 1996 for the KingSize
    Acquisition and as of January 31, 1998 for the Chadwick's Acquisition.
(4) Represents provision for income taxes as a corporate division of The Limited
    for the twenty-six weeks ended July 31, 1993, as a partnership for the
    twenty-six weeks ended January 29, 1994 and the fiscal years ended January
    28, 1995, February 3, 1996 and February 1, 1997, and as a corporation for
    the fiscal year ended January 31, 1998.
(5) Consists of deferred financing fees written off in connection with the
    repayment of the 1993 Bank Credit Facility and the 1996 Bank Credit
    Facility.

                                       21
<PAGE>
 
(6) Amount reflects adjustments for federal and state income taxes as if the
    Partnership had been taxed as a C-corporation during these periods.
(7) EBITDA represents earnings before taking into consideration interest
    expense, income tax expense, depreciation and amortization expense, non-
    recurring inventory charges, extraordinary charge related to write-off of
    deferred financing fees and non-cash compensation expense related to the
    Brylane, L.P. 1993 Partnership Unit Option Plan.  The use of such
    information is intended only to supplement the conventional income statement
    presentation and is not considered as an alternative to net income or any
    other indicator of Brylane's operating performance which is presented in
    accordance with generally accepted accounting principles above.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     The following discussion and analysis should be read in conjunction with
"Item 6.  Selected Financial Data" and the consolidated and combined financial
statements and related notes thereto which appear elsewhere in this Form 10-K.
The Company uses a 53/52 week fiscal year for financial reporting purposes.

     As a result of the Chadwick's Acquisition and the application of purchase
accounting related thereto, the Company's results of operations for fiscal 1996
and 1997 reflect non-recurring inventory charges of $1.7 million and $3.3
million, respectively, related to the write-up of Chadwick's inventory of $5.0
million.  The subsequent amortization of such write-up into cost of goods sold
reduced the Company's gross margin in fiscal 1996 and 1997.  In addition, the
Company's results reflect additional amortization expense of $5.2 million per
year associated with the write-up of certain intangible assets related to the
Chadwick's Acquisition.  Furthermore, Brylane entered into an agreement whereby
a third party has committed to purchase certain accounts receivable generated by
Chadwick's deferred billing programs.  Consequently, since the Chadwick's
Acquisition, accounts receivable related to the Chadwick's catalog have been
significantly lower than in Chadwick's historical periods.

     In addition to the amortization expense related to the Chadwick's
Acquisition described above, the Company's results reflect the amortization of
intangible assets related to the Brylane Acquisition of $4.4 million per year,
step-up depreciation associated with the write-up of certain fixed assets in
connection with the Brylane Acquisition of $0.4 million per year, and the
amortization of intangible assets related to the KingSize Acquisition of $1.4
million per year.  See "Item 6.  Selected Financial Data".  The termination date
of the Company's Trademark Agreement with The Limited was accelerated to October
20, 2007 in October 1997.  The amortization of intangible assets described above
reflects such acceleration.

     In connection with certain amendments to options previously granted under
the Brylane, L.P. 1993 Partnership Unit Option Plan, the Company incurred non-
cash compensation expense totalling $3.1 million, of which $2.4 million was
expensed in the fourth quarter of fiscal 1996 and $0.7 million was expensed in
fiscal 1997.

     The Company used the net proceeds received from the Initial Public Offering
to prepay approximately $89.3 million of borrowings outstanding under the term
loans of the 1996 Bank Credit Facility, which resulted in an extraordinary
charge of approximately $1.3 million, net of taxes, related to the write off of
deferred financing costs.  Subsequent thereto, the Company made an additional
$10.0 million of prepayments on the 1996 Bank Credit Facility prior to April 30,
1997.  On April 30, 1997, the Company replaced the 1996 Bank Credit Facility
with the 1997 Bank Credit Facility (which resulted in lower interest expense,
and an extraordinary charge of approximately $2.8 million, net of taxes, related
to the write off of deferred financing costs), and made $2.1 million of
prepayments on the 1997 Bank Credit Facility.  On May 2, 1997, the Company used
an additional $10.0 million of excess cash to prepay indebtedness outstanding
under the 1997 Bank Credit Facility.  Subsequent to May 3, 1997, the Company
used the $28.8 million in cash received from TJX in connection with the
preliminary purchase price adjustment, as well as cash generated from
operations, to prepay an additional $51.2 million in indebtedness outstanding
under the 1997 Bank Credit Facility as well as a mandatory payment of $1.8
million.  See "--Liquidity and Capital Resources".

     To finance the Common Stock Repurchase, the Company entered into an
amendment to its 1997 Bank Credit Facility (the "Amended 1997 Bank Credit
Facility") and borrowed approximately $116.8 million thereunder.  Borrowings
under the Amended 1997 Bank Credit Facility bear interest at LIBOR plus 1.25%.
The Amended 1997 Bank Credit Facility contains financial and operating covenants
including, among other provisions, requirements that the Company maintain
certain financial ratios and satisfy certain financial tests, restrictions on
the ability to incur

                                       22
<PAGE>
 
indebtedness, and limitations on the amount of the Company's capital
expenditures and common stock dividends.  See "--Liquidity and Capital
Resources".

     As a result of the Incorporation Plan, Brylane Inc. became subject to the
payment of federal and state income taxes.  Previously, income tax expense was
not recorded on the books and records of Brylane, L.P.; however, payments
approximating such taxes were distributed to all of Brylane, L.P.'s partners
based upon the tax liabilities with respect to the income allocated to certain
of Brylane, L.P.'s partners.  See "--Liquidity and Capital Resources" and 
"--Certain Tax Matters".

RESULTS OF OPERATIONS

     The following tables set forth certain operating data of the Company for
the periods indicated.


<TABLE>
<CAPTION>
                                                                                         PARTNERSHIP                 COMPANY
                                                                                ---------------------------------  -------------
                                                                                                 FISCAL YEAR ENDED
                                                                                ------------------------------------------------
                                                                                 FEB. 3, 1996(1)  FEB. 1, 1997(2)  JAN. 31, 1998
                                                                                ----------------  ---------------  -------------
                                                                                                  (IN THOUSANDS)
<S>                                                                                <C>             <C>              <C>
Net sales.......................................................................      $601,055       $705,353       $1,314,839
Gross margin before non-recurring inventory charge..............................       302,641        358,781          640,515
Non-recurring inventory charge..................................................           569          1,657            3,315
                                                                                      --------       --------       ----------
Gross margin....................................................................       302,072        357,124          637,200
Operating expenses:                                                                                               
   Catalog and advertising......................................................       174,446        186,985          302,232
   Fulfillment..................................................................        37,333         55,450          124,372
   Support services.............................................................        37,024         54,422           89,260
   Amortization of acquisitions intangibles and organization costs..............         4,707          6,518           10,972
                                                                                      --------       --------       ----------
Operating income................................................................        48,562         53,749          110,364
   Add back:  Non-recurring inventory charge(3).................................           569          1,657            3,315
              Amortization of acquisitions intangibles and organization costs(4)         4,707          6,518           10,972
              Non-cash compensation expense(5)..................................            --          2,400              700
                                                                                      --------       --------       ----------
   Operating income before acquisitions related and non-recurring adjustments...      $ 53,838       $ 64,324       $  125,351
                                                                                      ========       ========       ==========
</TABLE>

                                       23
<PAGE>
 
          The following table sets forth certain operating data of the Company
expressed as a percentage of net sales for the periods indicated.


<TABLE>
<CAPTION>
                                                                                            PARTNERSHIP               COMPANY
                                                                                ---------------------------------  -------------
                                                                                                 FISCAL YEAR ENDED
                                                                                ------------------------------------------------
                                                                                 FEB. 3, 1996(1)  FEB. 1, 1997(2)  JAN. 31, 1998
                                                                                ----------------  ---------------  -------------
<S>                                                                                <C>             <C>              <C>
Net sales..................................................................            100.0%           100.0%          100.0%
Gross margin before non-recurring inventory charge.........................             50.4             50.8            48.7
Non-recurring inventory charge.............................................              0.1              0.2             0.2
                                                                                       -----            -----           ----- 
Gross margin...............................................................             50.3             50.6            48.5
Operating expenses:
  Catalog and advertising..................................................             29.0             26.5            23.0
  Fulfillment..............................................................              6.2              7.9             9.5
  Support services.........................................................              6.2              7.7             6.8
  Amortization of acquisitions intangibles and organization costs..........              0.8              0.9             0.8
                                                                                       -----            -----           ----- 
Operating income...........................................................              8.1              7.6             8.4
  Add back:    Non-recurring inventory charge(3)...........................              0.1              0.2             0.2
               Amortization of acquisitions intangibles and organization
                 costs(4)..................................................              0.8              0.9             0.8
               Non-cash compensation expense(5)............................               --              0.4             0.1
                                                                                       -----            -----           ----- 
Operating income before acquisitions related and non-recurring adjustments.             9.0%             9.1%            9.5%
                                                                                       =====            =====           =====
</TABLE>
_____________________
(1) The fiscal year ended February 3, 1996 was a 53-week period.  All other
    fiscal years shown are 52-week periods.
(2) The Company's financial statements include the results of Chadwick's on a
    consolidated basis from December 9, 1996, the closing date of the Chadwick's
    Acquisition.
(3) The non-recurring inventory charges resulted from increasing inventory by
    $569,000 for the KingSize Acquisition and by $4,972,000 for the Chadwick's
    Acquisition to reflect the fair market value of the inventory at October 1,
    1995, the effective date of the KingSize Acquisition, and at December 9,
    1996 the effective date of the Chadwick's Acquisition, respectively.  The
    increases in inventory value had been fully amortized into cost of goods
    sold as of February 3, 1996 for the KingSize Acquisition, and as of January
    31, 1998 for the Chadwick's Acquisition.
(4) Represents amortization of goodwill and other intangible assets related to
    the Brylane Acquisition of $125,450,000 over a 30-year composite life and of
    organizational costs of $300,000 over five years and, subsequent to October
    4, 1997, includes amortization of the remaining trademark of $7,578,000 over
    a ten-year life.  Subsequent to October 1, 1995, includes amortization
    related to the KingSize Acquisition of goodwill of $50,762,000 over a 40-
    year life, of customer file of $520,000 over an eight-year life, and of a
    noncompetition agreement of $300,000 over a five-year life.  Subsequent to
    December 9, 1996, includes amortization related to the Chadwick's
    Acquisition of $175,715,000 over a 40-year life, and a customer file of
    $4,020,000 over a five-year life.
(5) Represents non-cash compensation expense related to amendments to options
    granted under the Brylane, L.P. 1993 Partnership Unit Option Plan.

                                       24
<PAGE>
 
  The following table sets forth certain historical operating data of Brylane
and Chadwick's on an unaudited combined basis for the fiscal years 1996 and 1997
to include net sales, cost of sales and operating expenses for Chadwick's.  The
unaudited combined information for the year ended February 1, 1997 is included
for comparative purposes only and is not meant to be indicative of what the
consolidated statements of operations data would have been had the transaction
occurred at February 4, 1996 (the first day of fiscal 1996).
<TABLE>
<CAPTION>
                                                                                       FISCAL YEAR ENDED              
                                                                               -------------------------------        
                                                                                     FEB. 1,        JAN. 31,          
                                                                                     1997(1)          1998            
                                                                               -------------------------------        
<S>                                                                                <C>              <C>               
                                                                                         (IN THOUSANDS)               
                                                                                                                      
Net sales....................................................................    $1,167,527       $1,314,839        
Gross margin before non-recurring inventory charge...........................       566,910          640,515        
Non-recurring inventory charge...............................................         1,657            3,315        
                                                                                 ----------       ----------         
Gross margin.................................................................       565,253          637,200        
 Operating expenses:                                                                                                 
 Catalog and advertising.....................................................       279,582          302,232        
 Fulfillment.................................................................       101,218          124,372        
 Support services............................................................        82,026           89,260        
 Amortization of acquisitions intangibles and organization costs.............         6,518           10,972        
                                                                                 ----------       ----------         
Operating income.............................................................        95,909          110,364        
 Add back: Non-recurring inventory charge(2).................................         1,657            3,315         
           Amortization of acquisitions intangibles and organization costs(3)         6,518           10,972
           Non-cash compensation expense(4)..................................         2,400              700
                                                                                 ----------       ---------- 
Operating income before acquisitions related and non-recurring adjustments...    $  106,484       $  125,351
                                                                                 ==========       ========== 
</TABLE>

The following table expresses the above operating data as a percentage of net
sales for the periods indicated.
<TABLE>
<CAPTION>
                                                                                         FISCAL YEAR ENDED           
                                                                                    ------------------------            
                                                                                        FEB. 1,     JAN. 31,            
                                                                                        1997(1)       1998              
                                                                                    ------------------------            
<S>                                                                                       <C>          <C>              
Net sales...........................................................................     100.0%        100.0%           
Gross margin before non-recurring inventory charge..................................      48.5          48.7            
Non-recurring inventory charge......................................................       0.1           0.2            
                                                                                         -----         -----            
Gross margin........................................................................      48.4          48.5            
Operating expenses:                                                                                                     
 Catalog and advertising............................................................      23.9          23.0            
 Fulfillment........................................................................       8.7           9.5            
 Support services...................................................................       7.0           6.8            
 Amortization of acquisitions intangibles and organization costs....................       0.6           0.8            
                                                                                         -----         -----            
Operating income....................................................................       8.2           8.4            
 Add back: Non-recurring inventory charge(2)........................................       0.1           0.2            
           Amortization of acquisitions intangibles and organization costs(3).......       0.6           0.8            
           Non-cash compensation expense(4).........................................       0.2           0.1            
                                                                                         -----         -----            
Operating income before acquisitions related and non-recurring adjustments..........       9.1%          9.5%           
                                                                                         =====         =====             
</TABLE>

                         (footnotes on following page)

                                       25
<PAGE>
 
_______________
(1) The fiscal year ended February 1, 1997 includes a 53-week period for
    Chadwick's.

(2) The non-recurring inventory charges resulted from increasing inventory by
    $4,972,000 for the Chadwick's Acquisition to reflect the fair market value
    of the inventory at December 9, 1996 the effective date of the Chadwick's
    Acquisition.  The increase in inventory value has been fully amortized into
    cost of goods sold as of January 31, 1998.

(3) Represents amortization of goodwill and other intangible assets related to
    the Brylane Acquisition of $125,450,000 over a 30-year composite life and of
    organizational costs of $300,000 over five years and subsequent to October
    4, 1997, includes amortization of the remaining trademark of $7,578,000 over
    a 10-year life.  Subsequent to October 1, 1995, includes amortization
    related to the KingSize Acquisition of goodwill of $50,762,000 over a 40-
    year life, of customer file of $520,000 over an eight-year life, and of a
    noncompetition agreement of $300,000 over a five-year life.  Subsequent to
    December 9, 1996, includes amortization related to the Chadwick's
    Acquisition of $175,715,000 over a 40-year life, and a customer file of
    $4,020,000 over a five-year life.

(4) Represents non-cash compensation expense related to amendments to options
    granted under the Brylane, L.P. 1993 Partnership Unit Option Plan.

FISCAL 1997 COMPARED TO FISCAL 1996

     NET SALES.  Net sales as reported for the fiscal year ended January 31,
1998 increased to $1,314.8 million from $705.4 million for the fiscal year ended
February 1, 1997.  The increase in net sales came principally from the inclusion
of the net sales from Chadwick's and also from the Company's other catalogs.

     Net sales on a combined basis including Chadwick's for fiscal 1996
increased 12.6% to $1,314.8 million from $1,167.5 million. The sales gain was
due primarily to an increase in circulation and an increase in the average order
size across all businesses.

     GROSS MARGIN.  Gross margin for the fiscal year ended January 31, 1998
increased to $637.2 million (48.5% of net sales) from $357.1 million (50.6% of
net sales) for fiscal 1996.  The lower gross margin as a percent of net sales is
due to the inclusion of the Chadwick's catalogs which have lower mark-ups on
merchandise sold as compared to the Company's other catalog titles.

     Gross margin on a combined basis including Chadwick's for fiscal 1996 and
eliminating the effects of the non-recurring inventory charge in the 1997 period
increased to $640.5 million (48.7% of net sales) in 1997 from $566.9 million
(48.5% of net sales) in 1996.  The gross margin as a percent of net sales
increased due to higher initial mark-ups from improved merchandise sourcing.

     CATALOG AND ADVERTISING EXPENSE.  Catalog and advertising expense is
comprised of the costs to produce and distribute catalogs, primarily paper,
printing and catalog mailing costs, and the cost of acquiring names of
prospective customers.  For fiscal 1997, catalog and advertising expense
increased to $302.2 million (23.0% of net sales) from $187.0 million (26.5% of
net sales) for fiscal 1996.  The decrease on a percent of net sales basis was
primarily due to the inclusion of Chadwick's and its associated catalog and
advertising expense and net sales.

     Catalog and advertising expense on a combined basis including Chadwick's
for fiscal 1996 decreased on a percent of net sales basis to 23.0% ($302.2
million) in 1997 from 23.9% ($279.6 million) in 1996.  This decrease on a
percent of net sales basis was primarily due to the renegotiation of certain
printing contracts and an increase in the sales productivity per catalog.

     FULFILLMENT EXPENSE.  Fulfillment expense includes distribution center,
telemarketing, credit services and customer service expenses, partially offset
by net merchandise postage revenue.  Fulfillment expense as reported for fiscal
1997 increased to $124.4 million (9.5% of net sales) from $55.5 million (7.9% of
net sales) for fiscal 1996.  The increase on a percent of net sales basis was
primarily due to the acquisition of Chadwick's, which incurs higher fulfillment
costs primarily as a result of its specialized garment packing techniques.

                                       26
<PAGE>
 
     Fulfillment expense on a combined basis including Chadwick's for fiscal
1996 increased on a percent of net sales basis to 9.5% ($124.4 million) in 1997
from 8.7% ($101.2 million) in 1996.  This increase on a percent of net sales
basis was primarily due to increased payroll in the distribution centers,
telemarketing and other areas to meet increased customer demand and to ensure a
high level of customer service, as well as increased shipping promotions.

     SUPPORT SERVICES EXPENSE.  Support services expense includes staffing and
other administrative overhead costs associated with the operation of the
business and the license fees associated with the Company's agreements with
Sears Shop at Home.  Support services expense as reported for fiscal 1997
increased to $89.3 million (6.8% of net sales) from $54.4 million (7.7% of net
sales) for fiscal 1996.  The decrease on a percent of net sales basis was
primarily due to the inclusion of Chadwick's and its associated overhead costs
and net sales.

     Support services expense on a combined basis including Chadwick's for
fiscal 1996 decreased as a percent of net sales to 6.8% ($89.3 million) in 1997
from 7.0% ($82.0 million) in 1996.  The decrease on a percent of net sales basis
is primarily due to expense management as well as the leverage resulting from
strong sales performance.

     AMORTIZATION EXPENSE.  Acquisition related intangibles and organization
cost amortization expense for fiscal 1997 included $4.4 million related to the
Brylane Acquisition, $1.4 million related to the KingSize Acquisition and $5.2
million related to the Chadwick's Acquisition.  Acquisition related intangibles
and organization cost amortization expense for fiscal 1996 included $4.2 million
related to the Brylane Acquisition, $1.4 million related to the KingSize
Acquisition and $0.9 million related to the Chadwick's Acquisition.

     OPERATING INCOME.  Operating income before acquisitions related and non-
recurring adjustments for fiscal 1997 increased to $125.4 million (9.5% of net
sales) from $64.3 million (9.1% of net sales) for fiscal 1996.  As a percent of
net sales, operating income increased primarily as a result of the decrease in
catalog and advertising and support services expenses, partially offset by the
increase in fulfillment expense, as described above.

     Operating income before acquisitions related and non-recurring adjustments,
on a combined basis including Chadwick's for fiscal 1996 increased to $125.4
million (9.5% of net sales) in 1997 from $106.5 million (9.1% of net sales) in
1996.  As a percent of net sales, operating income increased primarily as a
result of the decrease in catalog and advertising and support services expenses,
partially offset by the increase in fulfillment expense, as described above.

     INTEREST EXPENSE.  Interest expense, net, in fiscal 1997 increased to $27.7
million (2.1% of net sales) from $24.0 million (3.4% of net sales) for fiscal
1996.  The increase is due to borrowings of $210.0 million incurred in
connection with the Chadwick's Acquisition, offset by the prepayment of debt
from the proceeds of the Initial Public Offering and other prepayments on the
1997 Bank Credit Facility (as defined) and lower interest rates on the term
loans of the 1997 Bank Credit Facility and the term loan of the Amended 1997
Bank Credit Facility.  In October 1997, the Company also increased borrowings to
provide additional funding for the repurchase of 2,500,000 shares of Common
Stock.

     INCOME BEFORE INCOME TAXES AND EXTRAORDINARY CHARGE.  Income as reported
before income taxes and extraordinary charge increased to $82.7 million for
fiscal 1997 from $29.7 million for fiscal 1996.  This increase was due to the
inclusion of Chadwick's.

     INCOME TAXES.  Income taxes for fiscal 1997 were $31.5 million or 38.2% of
income before extraordinary charge.  Income taxes on supplemental income before
extraordinary charge were $31.0 million or 37.5%.  The difference between the
effective income tax rate as reported and the effective tax rate on supplemental
net income relates primarily to the allocation of loss to the Partnership for
the period prior to the Initial Public Offering.  The difference between the
effective tax rate on supplemental net income of 37.5% and the federal statutory
rate of 35% relates primarily to state income taxes, net of federal tax benefit.

     EXTRAORDINARY CHARGE.  An extraordinary charge of $4.1 million, net of tax,
was recorded in fiscal 1997 as a result of the early retirement of the debt
outstanding under the 1996 Bank Credit Facility.

                                       27
<PAGE>
 
     NET INCOME.  After giving effect to the extraordinary charge, net income
increased to $47.0 million ($2.53 per share) for fiscal 1997 from $27.0 million
($2.03 per unit) for fiscal 1996.

FISCAL 1996 COMPARED TO FISCAL 1995

     NET SALES.  Net sales for the fifty-two weeks ended February 1, 1997
increased 17.4% to $705.4 million from $601.1 million in the fifty-three weeks
ended February 3, 1996.  The increase in net sales is primarily due to the
acquisition of Chadwick's in December 1996.  Excluding sales from Chadwick's,
net sales increased by 6.8% to $642.0 million for fiscal 1996 from $601.1
million in fiscal 1995 primarily due to the acquisition of the KingSize and Big
& Tall catalogs, as well as increased sales from the Lerner catalog.  Excluding
both net sales of $11.8 million related to Brylane's fifty-third week of fiscal
1995 as well as sales from Chadwick's, net sales increased by 8.9% to $642.0
million for fiscal 1996 from $589.3 million in fiscal 1995.

     GROSS MARGIN.  Gross margin in fiscal 1996 improved to $357.1 million
(50.6% of net sales) from $302.1 million (50.3% of net sales) for fiscal 1995.
The gross margin for fiscal 1996 and 1995 includes the effect of non-recurring
charges of $1.7 million and $0.6 million, respectively, related to the step-up
of the value of inventory in connection with the Chadwick's Acquisition and the
KingSize Acquisition, respectively.  Excluding the non-recurring inventory
charges, gross margin for fiscal 1996 improved to $358.8 million (50.8% of net
sales) from $302.6 million (50.4% of net sales) for fiscal 1995.  The increase
in gross margin as a percent of net sales is primarily due to higher initial
mark-ups resulting from improved merchandise sourcing.

     CATALOG AND ADVERTISING EXPENSE.  For fiscal 1996, catalog and advertising
expense increased to $187.0 million (26.5% of net sales) from $174.4 million
(29.0% of net sales) for fiscal 1995.  The decrease in catalog and advertising
expense as a percent of net sales in fiscal 1996 was due to a decrease in
catalog production costs per catalog produced, an increase in the sales
productivity per catalog, and the addition of the Chadwick's catalog with lower
overall advertising costs for the eight week period ended February 1, 1997.

     FULFILLMENT EXPENSE.  Fulfillment expense in fiscal 1996 increased to $55.5
million (7.9% of net sales) from $37.3 million (6.2% of net sales) for fiscal
1995.  As a percent of net sales, fulfillment expense was higher due to
increased shipping promotions used to stimulate sales.

     SUPPORT SERVICES EXPENSE.  Support services expense for fiscal 1996
increased to $54.4 million (7.7% of net sales) from $37.0 million (6.2% of net
sales) for fiscal 1995.  The increase in support services expense as a percent
of net sales is due to an increase in staffing to support the growth of the
business and to an increase in the license fee paid to Sears, partially offset
by an increase in licensing revenue received from third parties.

     AMORTIZATION EXPENSE.  Acquisition related intangibles and organization
cost amortization expense in fiscal 1996 included $4.2 million related to the
Brylane Acquisition, $1.4 million related to the KingSize Acquisition and $0.9
million related to the Chadwick's Acquisition.  Acquisition related intangibles
and organization cost amortization expense in fiscal 1995 included $4.2 million
related to the Brylane Acquisition and $0.5 million related to the KingSize
Acquisition.

     OPERATING INCOME.  Operating income before acquisitions related
amortization, extraordinary charge and non-cash compensation expense in fiscal
1996 increased to $64.7 million (9.2% of net sales) from $54.2 million (9.0% of
net sales) for fiscal 1995.  As a percent of net sales, operating income
increased as a result of the decrease in catalog and advertising expense as
discussed above and an increase in gross margin, partially offset by an increase
in fulfillment and support services expenses.

     INTEREST EXPENSE.  Interest expense, net, in fiscal 1996 increased to $24.0
million (3.4% of net sales) from $20.6 million (3.4% of net sales) for fiscal
1995 due to the effects of the borrowings of $35.0 million incurred in
connection with the KingSize Acquisition on October 16, 1995 and since December
9, 1996, the effect of the increase in indebtedness for the financing of the
Chadwick's Acquisition, partially offset by slightly lower interest rates on the
term loans of the 1993 Bank Credit Facility.

                                       28
<PAGE>
 
     EXTRAORDINARY CHARGE.  An extraordinary charge of $2.5 million was recorded
in fiscal 1996 as a result of the early retirement of a portion of the debt
outstanding under the 1993 Bank Credit Facility.

     NET INCOME.  After giving effect to the extraordinary charge, net income
decreased to $27.0 million for fiscal 1996 from $27.9 million for fiscal 1995.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has historically met its working capital needs, principally
building inventory to meet increased sales, and its capital expenditure
requirements through funds generated from operations.  The Company's liquidity
requirements have also included servicing the debt incurred to finance various
acquisitions and will also include servicing the debt incurred to finance the
Common Stock Repurchase.

     Cash flow provided by operating activities increased to $66.6 million in
fiscal 1997, from $13.0 million in fiscal 1996.  This increase was due primarily
to an increase in net income, before non-cash related expenses, of $88.3 million
in fiscal 1997 compared to $46.5 million in fiscal 1996.  During fiscal 1997,
the Company used the proceeds from its Initial Public Offering to prepay a
portion of its outstanding indebtedness by $89.3 million, and used cash from
operations and the proceeds from a purchase price adjustment to further reduce
its outstanding indebtedness by $103.9 million (which included prepayments of
$10.0 million on the 1996 Bank Credit Facility and $92.1 million on the 1997
Bank Credit Facility and a mandatory payment of $1.8 million), as well as to
effect $12.7 million in capital expenditures as discussed further below.

     The Company's capital expenditures were $12.7, $3.9 million and $7.3
million for fiscal 1997, 1996 and 1995, respectively.  Of the total capital
expenditures of $12.7 million made in fiscal 1997, $3.0 million was incurred for
fulfillment center enhancements, $7.0 million for telemarketing systems
replacement and enhancements, $1.3 million in office improvements for the San
Antonio and New York locations, and $1.4 million for miscellaneous improvements.

     The Company's capital expenditures for fiscal 1998 are currently estimated
to be $13.0 million, including $2.5 million for expenditures at the Taunton,
Massachusetts facility, $3.5 million for management information systems, $1.2
million for expenditures related to Gramercy Home, and $4.0 million related to a
new receiving system for the Indianapolis fulfillment center.  The remaining
$1.8 million of capital expenditures in fiscal 1998 will be spent on routine
maintenance and upgrades for the Company's fulfillment centers.  Brylane plans
to fund its capital expenditures for fiscal 1998 using cash generated from
operations and drawing on its available funds under its Revolving Credit
Facility.

     In connection with the Chadwick's Acquisition, in December 1996 the
Partnership entered into a $408 million credit facility (the "1996 Bank Credit
Facility").  The proceeds of the 1996 Bank Credit Facility were used to fund a
portion of the cash paid upon the closing of the Chadwick's Acquisition
(including related fees and expenses) as well as to repay Brylane's then
existing indebtedness under its 1993 Bank Credit Facility.  In connection with
the Initial Public Offering, and the use of the net proceeds received therefrom,
the Company repaid $89.3 million in indebtedness under its 1996 Bank Credit
Facility.  Subsequently, the Company made an additional $10.0 million of
prepayments on the 1996 Bank Credit Facility prior to April 30, 1997.

     On April 30, 1997, the Partnership entered into a credit agreement among
Brylane, Morgan Guaranty Trust Company of New York, as administrative agent
("Morgan Guaranty"), Merrill Lynch Capital Corporation, as documentation agent
("Merrill Lynch Capital"), and the other lenders party thereto, and guaranteed
by each of the Company's subsidiaries (the "1997 Bank Credit Facility") which
consisted of (i) a $111.7 million four-year nine-month term loan (the "Tranche A
Term Loan"), (ii) a $70.0 million five-year and ten-month term loan (the
"Tranche B Term Loan", and collectively with the Tranche A Term Loan, the "1997
Term Loans"), and (iii) a $125.0 million four-year nine-month revolving credit
facility with a $75.0 million sublimit for letters of credit.  The proceeds of
the 1997 Term Loans were used to repay Brylane's existing indebtedness under the
1996 Bank Credit Facility.

                                       29
<PAGE>
 
     The Company prepaid $62.1 million on the Tranche A Term Loan of the 1997
Bank Credit Facility during fiscal 1997.  In addition, the Company made $1.8
million of scheduled payments on the 1997 Term Loans during fiscal 1997.

     To finance the Common Stock Repurchase, in October 1997 the Company entered
into the Amended 1997 Bank Credit Facility.  The Amended 1997 Bank Credit
Facility is comprised of (i) a $175.0 million five-year amortizing Term Loan
(the "Term Loan"), and (ii) a $200.0 million (subject to a borrowing base limit)
five-year revolving credit facility (the "Revolving Credit Facility") with a
$75.0 million sublimit for letters of credit and a $15.0 million "Swingline
Facility" (borrowings under which, while outstanding, would reduce availability
under the Revolving Credit Facility).  The proceeds of the Term Loan provided a
portion of the funds necessary to effect the Common Stock Repurchase, as well as
to repay Brylane's existing indebtedness under its 1997 Bank Credit Facility.

     The Revolving Credit Facility can be used for general corporate purposes,
including working capital needs, letters of credit and permitted acquisitions,
and was also available to provide a portion of the funds necessary to effect the
Common Stock Repurchase.

     The Term Loan requires scheduled quarterly principal payments over its
term.  In addition, Brylane is obligated to make certain mandatory prepayments
of the Term Loan and the Revolving Credit Facility under certain circumstances.
Borrowings under the Term Loan and Revolving Credit Facility bear interest at
one of two rates selected by the Partnership: (i) a margin over the higher of
(A) the Prime Rate and (B) the federal funds rate plus 0.5% or (ii) a margin
over LIBOR (as defined) for specified interest periods.  The margin for each
rate varies based on the ratio of the Partnership's net debt to operating cash
flow ratio.  Borrowings under the Revolving Credit Facility and the Term Loan
currently bear interest at LIBOR plus 1.25%.  The Term Loan begins amortizing on
May 1, 1998 and scheduled principal payments on the Term Loan of the Amended
1997 Bank Credit Facility will aggregate approximately $10.0 million in fiscal
1998 and $20.0 million in fiscal 1999.

     The Amended 1997 Bank Credit Facility contains financial and operating
covenants including, among other provisions, requirements that the Company
maintain certain financial ratios and satisfy certain financial tests,
restrictions on the ability to incur indebtedness, and limitations on the amount
of the Company's capital expenditures and common stock dividends.

     As of January 31, 1998, Brylane had $49.0 million of borrowings under the
Revolving Credit Facility and, after giving effect to the issuance of letters of
credit for $49.1 million which the Company intends to pay through funds
generated from operations, had additional capacity under the Revolving Credit
Facility of approximately $101.9 million.

     In connection with the Brylane Acquisition, the Partnership issued $125.0
million aggregate principal amount of its Senior Subordinated Notes. The Senior
Subordinated Notes bear interest at 10% per annum, payable semi-annually, and
mature in 2003. The Amended 1997 Bank Credit Facility and the Indenture contain
covenants (the "Covenants") that, among other things, restrict the Partnership's
ability to incur debt, make distributions, incur liens, make capital
expenditures and make investments or acquisitions. Brylane's capital
expenditures in fiscal 1997 were in compliance with the Covenants. See 
"--Certain Tax Matters".

     In connection with the Chadwick's Acquisition, Brylane entered into an
Accounts Receivables Purchase Agreement dated as of December 9, 1996 with
Alliance Data Systems Corporation ("ADS") (as amended on January 27, 1997, the
"Receivables Purchase Agreement") pursuant to which ADS has agreed to purchase
from the Company eligible customer accounts receivable generated through
Chadwick's deferred billing programs.  ADS' commitment to purchase receivables
is limited to $100.0 million outstanding at any time.  ADS' obligation to
purchase additional deferred billing receivables renews as it collects amounts
sufficient to bring outstanding receivables amounts below this $100 million
limitation.

     ADS purchases the receivables on a limited recourse basis at a discount
from face value.  The Company pays transaction costs including a fee of $0.03
per purchased account, and carrying costs equal to, at the Company's election,
LIBOR plus 95 basis points or the lesser of (a) a defined prime rate plus 15
basis points and (b) the federal funds rate plus 110 basis points.  The
receivables purchase facility has a three-year term and is subject to early

                                       30
<PAGE>
 
termination upon occurrence of certain events, including chargebacks and
customer default ratios above specified levels or an uncured default by the
Partnership under its Amended 1997 Bank Credit Facility.

     Based on current and projected operating results and giving effect to its
total indebtedness discussed above, the Company believes that cash flow from
operations and availability under its Revolving Credit Facility will provide
adequate funds for ongoing operations, debt service on its indebtedness
(including scheduled prepayments under the Amended 1997 Bank Credit Facility),
and planned capital expenditures for the foreseeable future.

SEASONALITY

     The Company has two annual six-month selling seasons, Spring/Summer and
Fall/Winter.  The Company is not dependent on the year-end holiday season for a
disproportionate share of its business.  The Company's sales and operating
results are more influenced throughout the year by the timing of the mailings of
its catalogs and by its merchandising strategies than by seasonal fluctuations.
Because the Company offers different products in each season, trends that are
manifested in one selling season may not be carried over into the next season.

INFLATION AND FOREIGN CURRENCY EXPOSURE

     The results of operations for the periods discussed have not been
significantly affected by inflation.  Foreign purchase orders are all
denominated in U.S. dollars and, therefore, foreign currency fluctuations are
not material to the Company's operating results.

COMPUTERIZED OPERATIONS AND THE YEAR 2000

     During recent years, there has been significant global awareness raised
regarding the potential disruption to business operations worldwide resulting
from the inability of current technology to process properly the change from the
year 1999 to 2000.  The Company has evaluated the significance of the change
from the year 1999 to the year 2000 on its existing computer systems and has
taken steps designed to ensure that its computer systems will not be adversely
affected thereby.  The financial impact of such steps is not anticipated to be
material.  In addition, the Company's systems rely in part on computer-based
systems of other companies.  As a result, if any such company failed to become
Year 2000 compliant, the Company could be adversely affected.

CERTAIN TAX MATTERS

     DEPRECIATION AND AMORTIZATION.  Prior to the PPR Stock Purchase, FS&Co. and
The Limited treated the Brylane Acquisition for federal income tax purposes as a
purchase by the Partnership of a proportionate part of the assets of Brylane
(approximately 57% of each asset) and as a contribution by certain affiliates of
The Limited of the remaining portion of such assets.  See "Item 1. Business--
History and Background".  FS&Co. and The Limited have allocated a substantial
portion of the purchase price paid for the purchased portion of the assets to
intangible assets which are being amortized for federal income tax purposes over
a 15-year period.

     The Partnership has elected under Section 754 of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), for its 1997 tax year to
increase the tax basis of its assets by approximately $47.2 million to reflect
the federal tax gain that The Limited and its affiliates recognized in
connection with the Limited Stockholder's contribution to the Company of its
partnership interest in the Partnership pursuant to the Exchange Transaction.  A
substantial portion of this adjustment in tax basis will be allocated to
intangible assets, which will be amortized for federal income tax purposes over
15 years.  This adjustment to tax basis does not require a comparable basis
adjustment in the Company's financial statements, but the future tax benefit
that the Company will recognize through the amortization thereof for tax
purposes is included in a deferred tax asset of approximately $10.7 million.

     TAX DISTRIBUTION.  To the extent that the partners of the Partnership
recognized taxable income resulting from the allocation of income of the
Partnership prior to the Initial Public Offering, pursuant to the Partnership
Agreement, such partners received a distribution to cover their federal and
state tax liabilities attributable thereto.  Subsequent to the Initial Public
Offering, the Company has filed tax returns on a consolidated basis, and as
such,

                                       31
<PAGE>
 
Brylane, L.P. will continue to make tax distributions to its general partner,
VGP Corporation, a Delaware corporation ("VGP"), and to its limited partner, VLP
Corporation, a Delaware corporation ("VLP"), both of which are wholly-owned
subsidiaries of VP Holding Corporation, a Delaware corporation and wholly-owned
subsidiary of the Company ("VP Holding").

     The Company is under audit by the Indiana Department of Revenue ("IDR") and
anticipates an assessment will be issued.  Based on discussions with the IDR,
the Company currently projects that the assessment, adjusted for the federal tax
benefit, will aggregate approximately $2.3 million including interest.  The
Company intends to vigorously contest this assessment, and believes it has made
adequate provision such that final settlement of its Indiana tax liability for
the years under audit will not have a material adverse effect on its
consolidated financial statements.

ADOPTION OF ACCOUNTING STANDARDS

     In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", which is effective for fiscal years beginning after
December 31, 1997.  SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses).  The Company intends to adopt this standard and include the
required disclosures in the financial statements prepared for its fiscal year
ending January 30, 1999.

     In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which is effective for fiscal years
beginning after December 15, 1997.  SFAS No. 131 requires that public business
enterprises report certain information about operating segments in complete sets
of financial statements and in condensed financial statements of interim periods
issued to stockholders.  The Company intends to adopt this standard and include
the required disclosures in the financial statements prepared for its fiscal
year ending January 30, 1999.

     In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits", which is effective for fiscal
years beginning after December 15, 1997.  SFAS No. 132 changes disclosure
requirements under previous accounting standards.  SFAS No. 132 standardizes
disclosure requirements for pensions and other postretirement benefits and
requires additional information be disclosed for other changes in plans and
increased disclosures for certain plans.  The Company intends to adopt this
standard and include the required disclosures in the financial statements
prepared for its fiscal year ending January 30, 1999.

     In March 1998, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") No. 98-1, "Accounting For The Costs Of Computer
Software Developed Or Obtained For Internal Use", which is effective for fiscal
years beginning after December 15, 1998.  SOP No. 98-1 establishes guidelines
for accounting for costs associated with internally developed or obtained
software.  The Company is currently expensing all internally developed software
costs.  The impact of SOP 98-1, if any, has not been determined.

                                       32
<PAGE>
 
                                 BRYLANE INC.
                           QUARTERLY DATA (UNAUDITED)
             (IN THOUSANDS, EXCEPT SHARES AND PER UNIT/SHARE DATA)
<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
                                            --------------------------------------------------------------
                                            MAY 3, 1997     AUG. 2, 1997     NOV. 1, 1997    JAN. 31, 1998    FULL YEAR
                                            -----------     ------------     ------------    -------------    ----------
<S>                                          <C>             <C>             <C>              <C>             <C> 
1997
----
Net sales...............................      $328,801        $274,656        $365,454        $345,928        $1,314,839
Gross margin............................       159,754         130,417         179,918         167,111           637,200
Income before extraordinary charge......         9,586          10,648          16,848          14,030            51,112
Net income..............................         5,476          10,648          16,848          14,063            47,035
 
Income per share before extraordinary       
 charge, basic(1).......................      $    .52        $    .55        $    .88        $    .81        $     2.75 
Income per share before extraordinary              
 charge, diluted(1).....................           .50             .53             .85             .77              2.67 
Stock price range(2) 
 High...................................      $ 29.375        $ 39.500        $ 49.375        $ 54.875
 Low....................................        21.250          26.500          37.750          42.000
</TABLE> 

<TABLE> 
<CAPTION> 
                                                                    THREE MONTHS ENDED
                                            -------------------------------------------------------------
                                            MAY 4, 1996     AUG. 3, 1996     NOV. 2, 1996    FEB. 1, 1997    FULL YEAR
                                            -----------     ------------     ------------    ------------    ---------
<S>                                          <C>             <C>             <C>              <C>             <C> 
1996
----
Net sales...............................      $150,680        $157,945        $158,384         $238,344       $705,353
Gross margin............................        78,018          80,709          82,574          115,823        357,124
Income before extraordinary charge......         4,688          11,304           7,313            6,103         29,408
Net income..............................         4,688          11,304           7,313            3,647         26,952
 
Income per unit before extraordinary          
 charge, basic(1).......................      $    .36        $    .88        $    .57         $    .42       $   2.22
Income per unit before extraordinary               
 charge, diluted(1).....................           .35             .85             .55              .41           2.05
</TABLE>

     The first quarter of 1997 includes an extraordinary charge of $4.1 million,
net of tax, related to the write off of deferred financing fees in connection
with the repayment of the 1993 Bank Credit Facility.  The estimate of related
taxes was revised during the fourth quarter of 1997.

     The fourth quarter of 1996 includes an extraordinary charge of $2.5 million
related to the write off of deferred financing fees in connection with the
repayment of the 1996 Bank Credit Facility.

     As of April 3, 1998 there were 118 registered holders of record of the
Company's Common Stock.  Since February 21, 1997, the Company has not declared
or paid cash dividends to its holder of Common Stock.  The Company does not
intend to change such policy in the foreseeable future.

______________
(1)  Earnings per unit/share information has been restated to reflect adoption
     of SFAS No. 128.

(2)  Brylane began trading under the symbol "BYL" on February 21, 1997.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See the Index included at "Item 14.  Exhibits, Financial Statement
Schedules, and Reports on Form 8-K".

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

     None.

                                       33
<PAGE>
 
                                 PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting to be held May 28, 1998, to
be filed with the Securities and Exchange Commission within 120 days after
January 31, 1998, and is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting to be held May 28, 1998, to
be filed with the Securities and Exchange Commission within 120 days after
January 31, 1998, and is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting to be held May 28, 1998, to
be filed with the Securities and Exchange Commission within 120 days after
January 31, 1998, and is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting to be held May 28, 1998, to
be filed with the Securities and Exchange Commission within 120 days after
January 31, 1998, and is incorporated herein by reference.

                                       34
<PAGE>
 
                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
                                                                                                  PAGE     
                                                                                                 NUMBER    
                                                                                                 ------    
<S>         <C>                                                                                  <C>       
(a)(1)      INDEX TO FINANCIAL STATEMENTS:                                                                 

            BRYLANE INC. AND SUBSIDIARIES AND PARTNERSHIPS                                                 

            Report of Independent Accountants...............................................      F-1      

            Consolidated Balance Sheets as of February 1, 1997 and January 31, 1998.........      F-2      

            Consolidated Statements of Income for the fiscal years ended February 3, 1996,        
              February 1, 1997 and January 31, 1998.........................................      F-3                  
                                                                                                           
            Consolidated Statements of Cash Flows for the fiscal years ended February 
              3, 1996, February 1, 1997 and January 31, 1998................................      F-5      

            Statements of Partnership/Stockholders' Equity for the fiscal years ended                      
              February 3, 1996, February 1, 1997 and January 31, 1998.......................      F-6      

            Notes to Consolidated Financial Statements......................................      F-7       

(a)(2)      INDEX TO FINANCIAL STATEMENT SCHEDULES:

            None.

(a)(3)      EXHIBITS

            2.1@@@@        First Amended and Restated Incorporation and Exchange Agreement
                           dated as of December 9, 1996 by and among FSEP II, FSEP III,
                           FSEP International, Lane Bryant Direct Holding, Inc., The
                           Limited, WearGuard, Leeway & Co., NYNEX, Chadwick's, Inc.
                           and Brylane Inc.

            3.1+           Certificate of Limited Partnership of the Partnership.

            3.2+           Agreement of Limited Partnership of the Partnership (the
                           "Partnership Agreement") dated as of August 30, 1993 (with forms
                           of Registration Rights Agreement (Newco) and Stockholders
                           Agreement (Newco) attached as exhibits thereto).

            3.3+           Certificate of Incorporation of Brylane Capital Corp. ("Brylane
                           Capital").

            3.4+           Bylaws of Brylane Capital.

            3.5+++         Amendment No. 1 to Partnership Agreement dated as of
                           November 22, 1993.

            3.6*           Amendment No. 2 to Partnership Agreement dated as of
                           January 28, 1994.

            3.7**          Amendment No. 3 to Partnership Agreement dated as of March 16,
                           1994.

            3.8@@@         Amendment No. 4 to Partnership Agreement dated October 14,
                           1994.

            3.9@@          Amendment No. 5 to Partnership Agreement dated September 22,
                           1995.
</TABLE> 

                                       35
<PAGE>
 
<TABLE> 
           <C>            <S> 
            3.10@@         Amendment No. 6 to Partnership Agreement dated October 16,
                           1995.

            3.11@@@@       Amendment No. 7 to Partnership Agreement dated October 14,
                           1996.

            3.12@@@@       Amendment No. 8 to the Partnership Agreement dated December 5,
                           1996.

            3.13#          Amended and Restated Agreement of Limited Partnership of the
                           Partnership dated as of February 26, 1997.

            3.14***        Certificate of Incorporation of Brylane Inc.

            3.15####       Bylaws of Brylane Inc., as amended April 3, 1998.

            3.16@@@@       Certificate of Amendment of Certificate of Incorporation of VP
                           Holding, as filed with the Office of the Secretary of State of
                           Delaware on December 5, 1996.

            3.17@@@@       Certificate of Designation of the Series A Convertible Redeemable
                           Preferred Stock of VP Holding as filed with the Office of the
                           Secretary of State of Delaware on December 6, 1996.

            3.18@@@@@@     Form of Certificate of Designation of the Series A Convertible
                           Redeemable Preferred Stock of Brylane Inc. filed with the Office of
                           the Secretary of State of Delaware on February 14, 1997.

            4.1+           Purchase Agreement dated August 20, 1993 among the Partnership,
                           Brylane Capital, VGP and each of the Initial Purchasers named
                           therein.

            4.2+           Registration Rights Agreement made and entered into the 30th day
                           of August, 1993 among the Partnership, Brylane Capital and the
                           Initial Purchasers.

            4.3+           Indenture dated as of August 30, 1993 among the Partnership and
                           Brylane Capital, as Issuers, B.L. Management, B.L. Distribution,
                           B.L. Management Partnership and B.L. Distribution Partnership, as
                           Guarantors, and United States Trust Company of New York, as
                           Trustee (the "Indenture").

             4.4+          Form of Old Note (included at page 37 of the Indenture).

             4.5+          Form of New Note (included at page 42 of the Indenture, as
                           amended at page 2 of the First Supplemental Indenture).
 
             4.6+          Form of Guarantee by B.L. Management, B.L. Distribution, B.L.
                           Management Partnership and B.L. Distribution Partnership (included
                           at page 57 and in Article Fourteen of the Indenture).

             4.7+          Form of Intercompany Note (included as Exhibit A to the
                           Indenture).

             4.8+++        First Supplemental Indenture dated as of November 22, 1993 by and
                           among the Partnership and Brylane Capital, as Issuers, and United
                           States Trust Company of New York, as Trustee.

             4.9*          Second Supplemental Indenture dated as of January 28, 1994 among
                           the Partnership, Brylane Capital, B.N.Y. Service Corp. and United
                           States Trust Company of New York, as Trustee.

             4.10@@        Third Supplemental Indenture dated as of October 16, 1995 by and
                           among the Partnership, Brylane Capital, KingSize Catalog Sales,
                           L.P., K.S. Management, KingSize Catalog Sales, Inc. and United
                           States Trust Company of New York, as Trustee.
</TABLE> 

                                       36
<PAGE>
 
<TABLE>
           <C>            <S>  
            4.11@@@@       Fourth Supplemental Indenture dated as of December 9, 1996 by
                           and among the Partnership, Brylane Capital, C.O.B. Management
                           Services, Inc., Chadwick's Tradename Sub, Inc. and United States
                           Trust Company of New York, as Trustee.

            4.12#          Registration Rights Agreement dated as of February 26, 1997 by and
                           among Brylane Inc., FSEP II, FSEP III, FSEP International, M&P
                           Distributing Company, The Limited, WearGuard, TJX, Leeway &
                           Co. and NYNEX.

            4.13#          Stockholders Agreement dated as of February 26, 1997 by and
                           among Brylane Inc., FSEP II, FSEP III, FSEP International, M&P
                           Distributing Company, The Limited, WearGuard, TJX, Leeway &
                           Co. and NYNEX.

           10.1+           Transaction Agreement dated as of July 13, 1993 among VGP, VLP
                           and the Transferors referred to therein (the "Transaction
                           Agreement").

           10.2+           Amendment No. 1 to Transaction Agreement dated as of August 30,
                           1993.

           10.3+           Addendum to Transaction Agreement dated August 30, 1993
                           executed by the Partnership.

           10.4+           Credit Card Processing Agreement (the "Credit Card Agreement")
                           made as of the 30th day of August, 1993 between World Financial
                           Network National Bank ("World Financial") and the Partnership.

           10.5@@@         Amendment No. 1 to Credit Card Agreement dated as of July 1,
                xx         1995 between World Financial and the Partnership.
 
           10.6+           Trademark License Agreement (the "Trademark License
                           Agreement") made as of the 20th day of August, 1993 among
                           Lanco, Inc., Lernco, Inc., Limited Stores, Inc., Lane Bryant, Inc.
                           (collectively, the "Licensors"), Lane Bryant Direct, Inc., and Lerner
                           Direct, Inc. (collectively, the "Licensees").

          10.7@@@@         Amendment No. 1 to Trademark License Agreement entered into as
                           of the 9th day of December, 1996 by and among Lanco, Inc.,
                           Lernco, Inc., Limited Stores, Inc., Lane Bryant, Inc., Lane Bryant
                           Direct Holding, Inc. and the Partnership.

          10.8#####        Amendment to Trademark License Agreement dated as of February
                           18, 1998 by and between Lanco, Inc., Lernco, Inc., Limited Stores,
                           Inc., Lane Bryant, Inc., Lerner Stores, Inc., Lane Bryant Direct
                           Holding, Inc. and the Partnership.

          10.9+            Electronic Media Trademark License Agreement made as of the 20th
                           day of August, 1993 among the Licensors and the Licensees.

          10.10+           Agreement to be Bound by the Trademark License Agreement and
                           the Electronic Media Trademark License Agreement executed by the
                           Partnership.

          10.11+           Service Agreement made as of the 30th day of August, 1993
                           between B.L. Management and the Partnership.

          10.12+           Catalog Production Agreement made and entered into as of the 30th
                           day of August, 1993 between B.L. Distribution Partnership and B.L.
                           Management Partnership.
</TABLE> 

                                       37
<PAGE>
 
<TABLE> 
          <C>            <S> 
           10.13++         Catalog Production, Distribution, License and Administrative
                           Services Agreement made and entered into as of the 30th day of
                           August, 1993 between the Partnership and B.L. Distribution
                           Partnership.

           10.14++         Credit Agreement dated as of April 30, 1997 (the "Credit
                           Agreement") among the Partnership, the Lenders listed on the
                           signature pages thereof, Morgan Guaranty Trust Company of New
                           York ("Morgan Guaranty"), as Administrative Agent, and Merrill
                           Lynch Capital Corporation ("Merrill Lynch"), as Documentation
                           Agent.

           10.15++         Security Agreement dated as of April 30, 1997 among the
                           Partnership, the Subsidiary Grantors (as defined therein), and
                           Morgan Guaranty, as Security Agent.

           10.16++         Pledge Agreement dated as of April 30, 1997 among the
                           Partnership, the Subsidiary Pledgors (as defined therein), and
                           Morgan Guaranty, as Security Agent.

           10.17++         Form of Tranche A Term Notes dated April 30, 1997, executed by
                           the Partnership in favor of each of the various Lenders which are
                           signatories to the Credit Agreement.

           10.18++         Form of Tranche B Term Notes dated April 30, 1997, executed by
                           the Partnership in favor of each of the various Lenders which are
                           signatories to the Credit Agreement.

           10.19++         Guarantee Agreement dated as of April 30, 1997 among the
                           Guarantors (as defined therein), Morgan Guaranty, as Administrative
                           Agent, and the Issuing Banks (as defined in the Credit Agreement).

           10.20@@@@@@@@   Form of Amended and Restated Credit Agreement among the
                           Partnership, the Lenders listed therein, Morgan Guaranty, as
                           Administrative Agent and Merrill Lynch, as Documentation Agent.

           10.21#####      Second Amendment dated as March 10, 1998 to the Credit
                           Agreement, as amended and restated as of October 20, 1997 among
                           the Partnership, the Lenders party thereto, Morgan Guaranty, as
                           Administrative Agent and Merrill Lynch, as Documentation Agent.

           10.22++         Trademark Collateral Agreement dated as of April 30, 1997 among
                           Lanco, Inc., Lernco, Inc., Limited Stores, Inc., Lerner Stores, Inc.,
                           Lane Bryant, Inc. and Morgan Guaranty, as Security Agent.

           10.23****       Loan Agreement made as of August 30, 1993 by and between
                           FSEP II, VP Holding and VGP.

           10.24****       No Interest Demand Promissory Note made by FSEP II in favor of
                           VP Holding.

           10.25****       Loan Agreement made as of August 30, 1993 by and between
                           FSEP III, VP Holding and VGP.

            10.26****      No Interest Demand Promissory Note made by FSEP III in favor of
                           VP Holding.

            10.27+         Form of Indemnity Agreement made by and between the Partnership
                           and each of the members of the Board of Representatives of the
                           Partnership.

            10.28+         Indemnity Agreement dated as of September 1993 made by and
                           between B.L. Management and Robert A. Pulciani.

            10.29+         Indemnity Agreement dated as of September 1993 made by and
                           between B.L. Distribution and Robert A. Pulciani.
</TABLE> 

                                       38
<PAGE>
 
<TABLE> 
           <C>            <S>   
            10.30+[X]      1993 Employee Stock Subscription Plan of VP Holding (the
                           "Subscription Plan").

            10.31***[X]    Amendment No. 1 to the Subscription Plan dated February 18, 1994.

            10.32+[X]      Stock Subscription Agreement made and entered into as of
                           August 30, 1993 by and between VP Holding and Peter Canzone
                           (with Secured Promissory Note and Stock Pledge Agreement
                           attached as exhibits thereto).

            10.33+[X]      Form of Stock Subscription Agreement made by and between VP
                           Holding and each of Sheila R. Garelik, Robert A. Pulciani, Richard
                           L. Bennett, William G. Brosius, Bruce G. Clark, Jules Silbert, Loida
                           Noriega-Wilson and Jessie Bourneuf who purchased common stock
                           of VP Holding under the Subscription Plan with cash and, in certain
                           cases, promissory note (with forms of Secured Promissory Note and
                           Stock Pledge Agreement attached as exhibits thereto).

            10.34+[X]      Form of Stock Subscription Agreement made by and between VP
                           Holding and each of Arlene Silverman, Kevin McGrain, Kevin
                           Doyle and certain other management investors who purchased
                           common stock of VP Holding under the Subscription Plan with cash
                           and, in certain cases, promissory note (with forms of Secured
                           Promissory Note and Stock Pledge Agreement attached as exhibits
                           thereto).

            10.35***[X]    Addendum dated February 18, 1994 to Stock Subscription
                           Agreement between VP Holding and Jules Silbert.

            10.36***[X]    Stock Subscription Agreement made and entered into as of May 27,
                           1994 by and between VP Holding and William C. Johnson.
  
            10.37+[X]      1993 Performance Partnership Unit Option Plan of the Partnership
                           (the "1993 Option Plan").
 
            10.38+[X]      Form of Performance Partnership Unit Option Agreement entered
                           into by and between the Partnership and each of Peter J. Canzone,
                           Sheila R. Garelik, Robert A. Pulciani, Richard L. Bennett, William
                           G. Brosius, Bruce G. Clark, Jules Silbert, Loida Noriega-Wilson and
                           Jessie Bourneuf under the 1993 Option Plan.

            10.39+[X]      Form of Performance Partnership Unit Option Agreement entered
                           into by and between the Partnership and each of Arlene Silverman,
                           Kevin McGrain, Kevin Doyle and certain other participants under
                           the 1993 Option Plan.

            10.40***[X]    Performance Partnership Unit Option Agreement entered into as of
                           May 27, 1994 by and between the Partnership and William C.
                           Johnson.

            10.41@@@@[X]   Form of Amendment to Performance Partnership Unit Option
                           Agreement under the 1993 Option Plan.

            10.42@[X]      1995 Partnership Unit Option Plan of the Partnership (the "1995
                           Option Plan").

            10.43@[X]      Form of Partnership Unit Option Agreement entered into by and
                           between the Partnership and each of Peter J. Canzone, Sheila R.
                           Garelik, Robert A. Pulciani, Richard L. Bennett, William G.
                           Brosius, Bruce G. Clark, Arlene Silverman, Jules Silbert, Loida
                           Noriega-Wilson, Jessie Bourneuf and William C. Johnson under the
                           1995 Option Plan.
</TABLE> 

                                       39
<PAGE>
 
<TABLE> 
         <S>                <C>   
          10.44@[X]          Form of Partnership Unit Option Agreement entered into by
                             and between the Partnership and each of Kevin McGrain, 
                             Kevin Doyle and certain other participants under the 1995
                             Option Plan.

          10.45@@@@[X]       Brylane Inc. 1996 Senior Management Stock Subscription Plan
                             (the "Senior Management Plan").

          10.46@@@@[X]       Form of Stock Subscription Agreement entered into by and
                             between Brylane Inc. and nine management investors who were
                             issued Common Stock of Brylane Inc. under the Senior  
                             Management Plan.

          10.47@@@@[X]       Form of Stock Subscription Agreement entered into by and
                             between Brylane Inc. and William C. Johnson under the
                             Senior Management Plan.   

          10.48@@@@[X]       Brylane Inc. 1996 Stock Subscription Plan (the "Brylane
                             Subscription Plan").
 
          10.49@@@@[X]       Form of Stock Subscription Agreement entered into by and between
                             Brylane Inc. and certain management employees who were issued
                             Common Stock of Brylane Inc. under the Brylane Subscription Plan.

          10.50@@@@[X]       Brylane Inc. 1996 Performance Stock Option Plan (the "Brylane
                             1996 Performance Option Plan").

          10.51#####[X]      Brylane Inc. 1998 Performance Stock Option Plan.

          10.52@@@@[X]       Form of Stock Option Agreement entered into by and between
                             Brylane Inc. and certain participants under the Brylane 1996
                             Performance Option Plan.

          10.53@@@@[X]       Form of Stock Option Agreement entered into by and between
                             Brylane Inc. and William C. Johnson under the Brylane 1996
                             Performance Option Plan.

          10.54#####[X]      Brylane Inc. 1996 Stock Option Plan, as amended April 1998 (the
                             "Brylane 1996 Option Plan").

          10.55@@@@[X]       Form of Stock Option Agreement entered into by and between
                             Brylane Inc. and certain participants under the Brylane 1996 Option
                             Plan.

          10.56#####[X]      Form of Amendment to Stock Option Agreements entered into by
                             and between Brylane Inc. and each of Peter J. Canzone, Robert A.
                             Pulciani, Sheila R. Garelik and Jules Silbert.

          10.57#####[X]      Form of Amendment to Stock Option Agreements entered into by
                             and between Brylane Inc. and each of Dhananjaya K. Rao and Carol
                             Meyrowitz.

          10.58@             License Agreement effective as of March 1, 1994 by and between
                x            the Partnership and Sears Shop At Home Services, Inc. ("Sears")
                             (with Exhibits E and F attached thereto).
 
          10.59@             License Agreement effective as of August 1, 1994 by and between
                x            WearGuard Corporation ("WearGuard") and Sears (with Exhibits E
                             and F attached thereto).
 
          10.60@             First Amendment to License Agreement effective as of August 1,
                             1995 by and between Sears and WearGuard.

          10.61@@@@          License Amendment made as of July 23, 1996 between the
               xxx           Partnership and Sears.
 
          10.62#####         Second Amendment to License Agreement entered into effective
                             March 1, 1998 by and between Sears and the Company.
</TABLE> 

                                       40
<PAGE>
 
<TABLE> 
         <C>                <S>  
          10.63@@            Asset Purchase Agreement dated September 22, 1995 by and among
                             the Partnership, WearGuard and ARAMARK Corporation
                             ("ARAMARK"), as guarantor.

          10.64@@            Letter Amendment to the Purchase Agreement dated September 22,
                             1995 by and between the Partnership and WearGuard.

          10.65@             Consent to Assignment dated October 10, 1995 between and among
                             Sears, WearGuard and KingSize Catalog Sales, L.P. ("KingSize
                             Partnership").

          10.66@@            Letter Amendment to the Purchase Agreement dated October 16,
                             1995 by and between the Partnership and WearGuard.

          10.67@@            Assignment of Purchase Agreement dated October 16, 1995 by and
                             among the Partnership, KingSize Partnership and K.S. Management.

          10.68@@            Transition Services Agreement dated as of October 16, 1995 by and
                             among the Partnership, KingSize Partnership, ARAMARK and
                             WearGuard.

          10.69@@            Noncompetition Agreement dated as of October 16, 1995 by and
                             among the Partnership, KingSize Partnership, ARAMARK and
                             WearGuard.

          10.70#####[X]      Form of Employment Agreement dated as of April 1, 1998
                             between B.L. Management and each of Peter J. Canzone, Robert A.
                             Pulciani, Jules Silbert, Kevin Doyle, Loida D. Noriega-Wilson and
                             Kevin McGrain.

          10.71#####[X]      Form of Employment Agreement dated as of April 1, 1998
                             between B.L. Management and each of Sheila Garelik and Arlene
                             Silverman.

          10.72#####[X]      Form of Employment Agreement dated as of April 1, 1998
                             between the Partnership and each of Richard Bennett, William
                             Brosius, Daniel L. Carr, Bruce Clark, Robert Evans, Lawrence
                             Kinney and Henry Wren.

          10.73@@@@          Asset Purchase Agreement dated as of October 18, 1996 by and
                             among TJX, Chadwick's and the Partnership.

          10.74@@@@          Amendment Number One to the Asset Purchase Agreement made as
                             of the 9th day of December, 1996 among TJX, Chadwick's and the
                             Partnership.

          10.75@@@@          Asset Purchase Agreement dated as of October 18, 1996 by and
                             among CDM Corp. and the Partnership.

          10.76@@@@          Services Agreement dated as of December 9, 1996 between TJX and
                             the Partnership.

          10.77@@@@@         Amendment to Services Agreement dated as of December 9, 1996
                             between TJX and the Partnership.

          10.78@@@@          Inventory Purchase Agreement effective as of December 9, 1996 by
               xxx           and between the Partnership and TJX.
 
          10.79#####[X]      Form of Employment Agreement dated as of April 1, 1998
                             between the Partnership and each of Dhananjaya K. Rao and Carol
                             Meyrowitz.

          10.80@@@@[X]       VP Holding Stock Subscription Agreement for Preferred Stock made
                             as of December 9, 1996 by and between VP Holding and
                             Dhananjaya K. Rao.
</TABLE> 

                                       41
<PAGE>
 
<TABLE> 
         <C>                <S> 
          10.81@@@@[X]       VP Holding Stock Subscription Agreement for Preferred Stock made
                             as of December 9, 1996 by and between VP Holding and Carol
                             Meyrowitz.

          10.82@@@@[X]       Form of Brylane Inc. Stock Subscription Agreement for Preferred
                             Stock made as of December 9, 1996 by and between Brylane Inc.
                             and each of Dhananjaya K. Rao and Carol Meyrowitz.

          10.83@@@@          Brylane, L.P. Convertible Subordinated Note Due 2006 dated
                             December 9, 1996 made by the Partnership in favor of Chadwick's
                             (with Brylane Inc. and Brylane, L.P. Convertible Subordinated Note
                             Due 2006 made by Brylane Inc. and the Partnership in favor of
                             Chadwick's filed as an exhibit thereto).

           10.84@@@@         Unit Subscription Agreement entered into as of December 5, 1996
                             by and among the Partnership, VP Holding, FSEP II, FSEP III,
                             FSEP International, VGP, VLP, WearGuard, Leeway and NYNEX.

           10.85@@@@         Accounts Receivable Purchase Agreement dated as of December 9,
                             1996 between the Partnership and Alliance Data Systems
                             Corporation.

           10.86@@@@@@@      Form of Repurchase Agreement entered into as of September 29,
                             1997 by and between the Company and each of FSEP II, FSEP III,
                             FSEP International, M&P Distributing Company, WearGuard, TJX,
                             Leeway & Co., NYNEX and William C. Johnson.

           10.87###          Stock Purchase Agreement among FSEP II, FSEP III, FSEP
                             International and PPR dated as of February 19, 1998.

           10.88###          Stock Purchase Agreement among M&P Distributing Company and
                             PPR dated as of February 19, 1998.

           10.89####         Governance Agreement by and between the Company and PPR
                             dated as of April 3, 1998.

           10.90####         Registration Rights Agreement dated as of April 3, 1998 between
                             the Company and PPR.
  
           21.1#####         Subsidiaries of Brylane Inc./Brylane, L.P.

           23.1#####         Consent of Coopers & Lybrand L.L.P. regarding Brylane Inc.

           27.1#####         Financial Data Schedule for fiscal year ended January 31, 1998.
 
           27.2#####         Restated Financial Data Schedule for quarter ended May 3, 1997.

           27.3#####         Restated Financial Data Schedule for quarter ended August 2, 1997.

           27.4#####         Restated Financial Data Schedule for quarter ended November 1, 1997.
</TABLE>
_______________
+              Filed as an exhibit to the Partnership's Registration Statement
               on Form S-4 (Registration No. 33-69532) on September 29, 1993 and
               incorporated by reference herein.
++             Filed as an exhibit to Amendment No. 1 to the Partnership's
               Registration Statement on Form S-4 (Registration No. 33-69532) on
               November 9, 1993 and incorporated by reference herein.
+++            Filed as an exhibit to Amendment No. 2 to the Partnership's
               Registration Statement on Form S-4 (Registration No. 33-69532) on
               November 23, 1993 and incorporated by reference herein.
*              Filed on April 25, 1994 as an exhibit to the Partnership's Annual
               Report on Form 10-K for the fiscal year ended January 29, 1994
               and incorporated by reference herein.
**             Filed on June 8, 1994 as an exhibit to the Partnership's
               Quarterly Report on Form 10-Q for the quarterly period ended
               April 30, 1994 and incorporated by reference herein.
***            Filed as an exhibit to Brylane Inc.'s Registration Statement on
               Form S-1 (Registration No. 33-86154) on November 9, 1994 and
               incorporated by reference herein.
****           Filed as an exhibit to Amendment No. 1 to Brylane Inc.'s 
               Registration Statement on Form S-1 (Registration No. 33-86154)
               on January 11, 1995 and incorporated by reference herein.

                                       42
<PAGE>
 
@              Filed on December 12, 1995 as an exhibit to the Partnership's
               Quarterly Report on Form 10-Q for the quarterly period ended
               October 28, 1995 (the "1995 Third Quarter Form 10-Q") and
               incorporated by reference herein.
@@             Filed on December 30, 1995 as an exhibit to the Partnership's
               Amendment of Current Report on Form 8-K/A (File No. 33-69532) and
               incorporated by reference herein.
@@@            Filed on May 3, 1996 as an exhibit to the Partnership's Annual
               Report on Form 10-K for the fiscal year ended February 3, 1996
               ("1995 Form 10-K") and incorporated by reference herein.
@@@@           Filed as an exhibit to Amendment No. 2 to Brylane Inc.'s
               Registration Statement on Form S-1 (Registration No. 33-86154) on
               December 23, 1996 and incorporated by reference herein.
@@@@@          Filed as an exhibit to Amendment No. 3 to Brylane Inc.'s
               Registration Statement on Form S-1 (Registration No. 33-86154) on
               January 29, 1997 and incorporated by reference herein.
@@@@@@         Filed as an exhibit to Amendment No. 4 to Brylane Inc.'s
               Registration Statement on Form S-1 (Registration No. 33-86154) on
               February 19, 1997 and incorporated by reference herein.
@@@@@@@        Filed as an exhibit to Amendment No. 1 to the Company's
               Registration Statement on Form S-1 (Registration No. 333-35715)
               on September 30, 1997 and incorporated by reference herein.
@@@@@@@@       Filed as an exhibit to Amendment No. 2 to the Company's
               Registration Statement on Form S-1 (Registration No. 333-35715 on
               October 14, 1997 and incorporated by reference herein.
x              Certain portions of this exhibit have been omitted from the
               copies incorporated by reference from the Partnership's 1995
               Third Quarter Form 10-Q (as defined herein) and are the subject
               of an order granting confidential treatment with respect thereto.
xx             Certain portions of this exhibit have been omitted from the
               copies incorporated by reference from the Partnership's 1995 Form
               10-K (as defined herein) and are the subject of an order granting
               confidential treatment with respect thereto.
xxx            Certain portions of this exhibit have been omitted from the
               copies filed as part of Amendment No. 2 to Brylane Inc.'s
               Registration Statement on Form S-1 and are the subject of a
               request for confidential treatment with respect thereto.
#              Filed on May 2, 1997 as an exhibit to the Company's Annual Report
               on 10-K for the fiscal year ended February 1, 1997 and
               incorporated by reference herein.
##             Filed on June 17, 1997 as an exhibit to the Company's Quarterly
               Report on 10-Q for the quarterly period ended May 3, 1997 and
               incorporated by reference herein.
###            Filed on March 4, 1998 as an exhibit to the Company's Current
               Report on Form 8-K and incorporated by reference herein.
####           Filed on April 17, 1998 as an exhibit to the Company's Current
               Report on Form 8-K and incorporated by reference herein.
#####          Filed herewith.
[X]            Management contract or executive compensation plan or
               arrangement.

(b)     REPORTS ON FORM 8-K

        On March 4, 1998, Brylane Inc. filed a Current Report on Form 8-K (File
No. 33-86154) to include, under "Item 5. Other Events", a description of the
agreements whereby Pinault Printemps-Redoute, S.A., a company organized under
the laws of France ("PPR"), agreed to acquire Common Stock from certain
stockholders of the Company (including all of the Common Stock held by
affiliates of Freeman Spogli & Co. Incorporated and an affiliate of The Limited,
Inc., as well as certain shares held by certain members of management of the
Company) and to include the following exhibits relating to PPR's acquisition of
Common Stock: (i) the definitive Stock Purchase Agreements dated February 19,
1998, (ii) the Form of Governance Agreement between Brylane Inc. and PPR and
(iii) other documents relating to PPR's purchase of Common Stock.

        On April 17, 1998, Brylane Inc. filed a Current Report on Form 8-K (File
No. 33-86154) to include, under "Item 1. Changes in Control of Registrant", a
description of the arrangements whereby PPR acquired approximately 43% of the
Common Stock held by certain stockholders of the Company (including all of the
Common Stock held by affiliates of Freeman Spogli & Co. Incorporated and an
affiliate of The Limited, Inc., as well as certain shares held by certain
members of management of the Company) and to include the following exhibits
relating to PPR's acquisition of Common Stock: (i) the definitive Governance
Agreement between Brylane Inc. and PPR, (ii) the amended Bylaws of Brylane Inc.,
(iii) the definitive Registration Rights Agreement between Brylane Inc. and PPR
and (iv) other documents relating to PPR's purchase of Common Stock.

                                       43
<PAGE>
 
(c)     EXHIBITS

        The Exhibits listed on the accompanying Index to Exhibits are filed as
part of this Form 10-K.

                                       44
<PAGE>
 
                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 30th day of April, 1998.

                              Brylane Inc.


                              By: /s/ ROBERT A. PULCIANI
                                  -------------------------
                                  Robert A. Pulciani
                                  Executive Vice President,
                                  Chief Financial Officer,
                                  Secretary and Treasurer


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

<TABLE>
<CAPTION>
        SIGNATURE                       TITLE                                   DATE
        ---------                       -----                               
<S>                         <C>                                            <C>
/s/ PETER J. CANZONE        Chief Executive Officer and Director            April 30, 1998 
-----------------------     (Principal Executive Officer)
   Peter J. Canzone
 
/s/ ROBERT A. PULCIANI      Executive Vice President, Chief Financial       April 30, 1998  
------------------------    Officer, Secretary and Treasurer (Principal    
    Robert A. Pulciani      Financial and Accounting Officer)              
                                                                           
/s/ SERGE WEINBERG          Director                                        April 30, 1998  
------------------------                                                   
    Serge Weinberg                                                         
                                                                           
/s/ HARTMUT KRAMER          Director                                        April 30, 1998  
-------------------------                                                  
    Harmut Kramer                                                          
                                                                           
/s/ JOHANNES LONING         Director                                        April 30, 1998  
-------------------------                                                  
    Johannes Loning                                                        
                                                                           
/s/ ANTOINE METZGER         Director                                        April 30, 1998  
-------------------------                                                  
    Antoine Metzger                                                        
                                                                           
/s/ RICHARD SIMONIN         Director                                        April 30, 1998  
-------------------------                                                  
    Richard Simonin                                                        
                                                                           
/s/ WILLIAM C. JOHNSON      Director                                        April 30, 1998  
-------------------------                                                  
   William C. Johnson                                                      
                                                                           
/s/ PETER M. STARRETT       Director                                        April 30, 1998  
-------------------------                                                  
    Peter M. Starrett                                                      
                                                                           
/s/ JUDITH E. CAMPBELL      Director                                        April 30, 1998  
------------------------- 
    Judith E. Campbell 
</TABLE>

                                       45
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------
<TABLE>
<CAPTION>
        EXHIBIT                                                                                        PAGE
        NUMBER                                         DESCRIPTION                                    NUMBER
        ------                                         -----------                                    ------
          <C>             <S>                                                                       <C>
           2.1@@@@         First Amended and Restated Incorporation and Exchange Agreement
                           dated as of December 9, 1996 by and among FSEP II, FSEP III,
                           FSEP International, Lane Bryant Direct Holding, Inc., The Limited,
                           WearGuard, Leeway & Co., NYNEX, Chadwick's, Inc. and Brylane
                           Inc.

           3.1+            Certificate of Limited Partnership of the Partnership.

           3.2+            Agreement of Limited Partnership of the Partnership (the
                           "Partnership Agreement") dated as of August 30, 1993 (with forms
                           of Registration Rights Agreement (Newco) and Stockholders
                           Agreement (Newco) attached as exhibits thereto).

           3.3+            Certificate of Incorporation of Brylane Capital Corp. ("Brylane
                           Capital").

           3.4+            Bylaws of Brylane Capital.

           3.5+++          Amendment No. 1 to Partnership Agreement dated as of
                           November 22, 1993.

           3.6*            Amendment No. 2 to Partnership Agreement dated as of January 28,
                           1994.

           3.7**           Amendment No. 3 to Partnership Agreement dated as of March 16,
                           1994.

           3.8@@@          Amendment No. 4 to Partnership Agreement dated October 14,
                           1994.

           3.9@@           Amendment No. 5 to Partnership Agreement dated September 22,
                           1995.

           3.10@@          Amendment No. 6 to Partnership Agreement dated October 16,
                           1995.

           3.11@@@@        Amendment No. 7 to Partnership Agreement dated October 14,
                           1996.

           3.12@@@@        Amendment No. 8 to the Partnership Agreement dated December 5,
                           1996.

           3.13#           Amended and Restated Agreement of Limited Partnership of the
                           Partnership dated as of February 26, 1997.

           3.14***         Certificate of Incorporation of Brylane Inc.

          3.15####         Bylaws of Brylane Inc., as amended April 3, 1998.

          3.16@@@@         Certificate of Amendment of Certificate of Incorporation of VP
                           Holding, as filed with the Office of the Secretary of State of
                           Delaware on December 5, 1996.

          3.17@@@@         Certificate of Designation of the Series A Convertible Redeemable
                           Preferred Stock of VP Holding as filed with the Office of the
                           Secretary of State of Delaware on December 6, 1996.

          3.18@@@@@@       Form of Certificate of Designation of the Series A Convertible
                           Redeemable Preferred Stock of Brylane Inc. filed with the Office of
                           the Secretary of State of Delaware on February 14, 1997.

          4.1+             Purchase Agreement dated August 20, 1993 among the Partnership,
                           Brylane Capital, VGP and each of the Initial Purchasers named
                           therein.
</TABLE> 

                                       46
<PAGE>
 
<TABLE>
<CAPTION>
        EXHIBIT                                                                                        PAGE
        NUMBER                                         DESCRIPTION                                    NUMBER
        ------                                         -----------                                    ------
          <C>             <S>                                                                       <C>
          4.2+             Registration Rights Agreement made and entered into the 30th day
                           of August, 1993 among the Partnership, Brylane Capital and the
                           Initial Purchasers.

          4.3+            Indenture dated as of August 30, 1993 among the Partnership and
                           Brylane Capital, as Issuers, B.L. Management, B.L. Distribution,
                           B.L. Management Partnership and B.L. Distribution Partnership, as
                           Guarantors, and United States Trust Company of New York, as
                           Trustee (the "Indenture").

          4.4+             Form of Old Note (included at page 37 of the Indenture).

          4.5+             Form of New Note (included at page 42 of the Indenture, as
                           amended at page 2 of the First Supplemental Indenture).

          4.6+             Form of Guarantee by B.L. Management, B.L. Distribution, B.L.
                           Management Partnership and B.L. Distribution Partnership (included
                           at page 57 and in Article Fourteen of the Indenture).

          4.7+             Form of Intercompany Note (included as Exhibit A to the
                           Indenture).

          4.8+++           First Supplemental Indenture dated as of November 22, 1993 by and
                           among the Partnership and Brylane Capital, as Issuers, and United
                           States Trust Company of New York, as Trustee.

          4.9*             Second Supplemental Indenture dated as of January 28, 1994 among
                           the Partnership, Brylane Capital, B.N.Y. Service Corp. and United
                           States Trust Company of New York, as Trustee.

          4.10@@           Third Supplemental Indenture dated as of October 16, 1995 by and
                           among the Partnership, Brylane Capital, KingSize Catalog Sales,
                           L.P., K.S. Management, KingSize Catalog Sales, Inc. and United
                           States Trust Company of New York, as Trustee.

          4.11@@@@         Fourth Supplemental Indenture dated as of December 9, 1996 by
                           and among the Partnership, Brylane Capital, C.O.B. Management
                           Services, Inc., Chadwick's Tradename Sub, Inc. and United States
                           Trust Company of New York, as Trustee.

          4.12#            Registration Rights Agreement dated as of February 26, 1997 by and
                           among Brylane Inc., FSEP II, FSEP III, FSEP International, M&P
                           Distributing Company, The Limited, WearGuard, TJX, Leeway &
                           Co. and NYNEX.

          4.13#           Stockholders Agreement dated as of February 26, 1997 by and
                           among Brylane Inc., FSEP II, FSEP III, FSEP International, M&P
                           Distributing Company, The Limited, WearGuard, TJX, Leeway &
                           Co. and NYNEX.

         10.1+             Transaction Agreement dated as of July 13, 1993 among VGP, VLP
                           and the Transferors referred to therein (the "Transaction
                           Agreement").

         10.2+             Amendment No. 1 to Transaction Agreement dated as of August 30,
                           1993.

         10.3+             Addendum to Transaction Agreement dated August 30, 1993
                           executed by the Partnership.
</TABLE> 

                                       47
<PAGE>
 
<TABLE>
<CAPTION>
        EXHIBIT                                                                                        PAGE
        NUMBER                                         DESCRIPTION                                    NUMBER
        ------                                         -----------                                    ------
          <C>             <S>                                                                       <C>
          10.4+           Credit Card Processing Agreement (the "Credit Card Agreement")
                           made as of the 30th day of August, 1993 between World Financial
                           Network National Bank ("World Financial") and the Partnership.

          10.5@@@          Amendment No. 1 to Credit Card Agreement dated as of July 1,
               xx          1995 between World Financial and the Partnership.
 
          10.6+            Trademark License Agreement (the "Trademark License
                           Agreement") made as of the 20th day of August, 1993 among
                           Lanco, Inc., Lernco, Inc., Limited Stores, Inc., Lane Bryant, Inc.
                           (collectively, the "Licensors"), Lane Bryant Direct, Inc., and Lerner
                           Direct, Inc. (collectively, the "Licensees").

          10.7@@@@         Amendment No. 1 to Trademark License Agreement entered into as
                           of the 9th day of December, 1996 by and among Lanco, Inc.,
                           Lernco, Inc., Limited Stores, Inc., Lane Bryant, Inc., Lane Bryant
                           Direct Holding, Inc. and the Partnership.

          10.8#####        Amendment to Trademark License Agreement dated as of February
                           18, 1998 by and between Lanco, Inc., Lernco, Inc., Limited Stores,
                           Inc., Lane Bryant, Inc., Lerner Stores, Inc., Lane Bryant Direct
                           Holding, Inc. and the Partnership.

          10.9+            Electronic Media Trademark License Agreement made as of the 20th
                           day of August, 1993 among the Licensors and the Licensees.

          10.10+           Agreement to be Bound by the Trademark License Agreement and
                           the Electronic Media Trademark License Agreement executed by the
                           Partnership.

          10.11+           Service Agreement made as of the 30th day of August, 1993
                           between B.L. Management and the Partnership.

          10.12+           Catalog Production Agreement made and entered into as of the 30th
                           day of August, 1993 between B.L. Distribution Partnership and B.L.
                           Management Partnership.

          10.13++          Catalog Production, Distribution, License and Administrative
                           Services Agreement made and entered into as of the 30th day of
                           August, 1993 between the Partnership and B.L. Distribution
                           Partnership.

          10.14++          Credit Agreement dated as of April 30, 1997 (the "Credit
                           Agreement") among the Partnership, the Lenders listed on the
                           signature pages thereof, Morgan Guaranty Trust Company of New
                           York ("Morgan Guaranty"), as Administrative Agent, and Merrill
                           Lynch Capital Corporation ("Merrill Lynch"), as Documentation
                           Agent.

          10.15++          Security Agreement dated as of April 30, 1997 among the
                           Partnership, the Subsidiary Grantors (as defined therein), and
                           Morgan Guaranty, as Security Agent.

          10.16++          Pledge Agreement dated as of April 30, 1997 among the
                           Partnership, the Subsidiary Pledgors (as defined therein), and
                           Morgan Guaranty, as Security Agent.

          10.17++          Form of Tranche A Term Notes dated April 30, 1997, executed by
                           the Partnership in favor of each of the various Lenders which are
                           signatories to the Credit Agreement.
</TABLE> 

                                       48
<PAGE>
 
<TABLE>
<CAPTION>
          EXHIBIT                                                                                        PAGE
          NUMBER                                         DESCRIPTION                                    NUMBER
          ------                                         -----------                                    ------
          <C>             <S>                                                                       <C>
           10.18++         Form of Tranche B Term Notes dated April 30, 1997, executed by
                           the Partnership in favor of each of the various Lenders which are
                           signatories to the Credit Agreement.

           10.19++         Guarantee Agreement dated as of April 30, 1997 among the
                           Guarantors (as defined therein), Morgan Guaranty, as Administrative
                           Agent, and the Issuing Banks (as defined in the Credit Agreement).

           10.20@@@@@@@@   Form of Amended and Restated Credit Agreement among the
                           Partnership, the Lenders listed therein, Morgan Guaranty, as
                           Administrative Agent and Merrill Lynch, as Documentation Agent.

           10.21#####      Second Amendment dated as of March 10, 1998 to the Credit
                           Agreement, as amended and restated as of October 20, 1997 among
                           the Partnership, the Lenders party thereto, Morgan Guaranty, as
                           Administrative Agent and Merrill Lynch, as Documentation Agent.

           10.22++         Trademark Collateral Agreement dated as of April 30, 1997 among
                           Lanco, Inc., Lernco, Inc., Limited Stores, Inc., Lerner Stores, Inc.,
                           Lane Bryant, Inc. and Morgan Guaranty, as Security Agent.

           10.23****       Loan Agreement made as of August 30, 1993 by and between
                           FSEP II, VP Holding and VGP.

           10.24****       No Interest Demand Promissory Note made by FSEP II in favor of
                           VP Holding.

           10.25****       Loan Agreement made as of August 30, 1993 by and between
                           FSEP III, VP Holding and VGP.

           10.26****       No Interest Demand Promissory Note made by FSEP III in favor of
                           VP Holding.

           10.27+          Form of Indemnity Agreement made by and between the Partnership
                           and each of the members of the Board of Representatives of the
                           Partnership.

           10.28+          Indemnity Agreement dated as of September 1993 made by and
                           between B.L. Management and Robert A. Pulciani.

           10.29+          Indemnity Agreement dated as of September 1993 made by and
                           between B.L. Distribution and Robert A. Pulciani.

           10.30+[X]       1993 Employee Stock Subscription Plan of VP Holding (the
                           "Subscription Plan").

           10.31***[X]     Amendment No. 1 to the Subscription Plan dated February 18, 1994.

           10.32+[X]       Stock Subscription Agreement made and entered into as of
                           August 30, 1993 by and between VP Holding and Peter Canzone
                           (with Secured Promissory Note and Stock Pledge Agreement
                           attached as exhibits thereto).
  
           10.33+[X]       Form of Stock Subscription Agreement made by and between VP
                           Holding and each of Sheila R. Garelik, Robert A. Pulciani, Richard
                           L. Bennett, William G. Brosius, Bruce G. Clark, Jules Silbert, Loida
                           Noriega-Wilson and Jessie Bourneuf who purchased common stock
                           of VP Holding under the Subscription Plan with cash and, in certain
                           cases, promissory note (with forms of Secured Promissory Note and
                           Stock Pledge Agreement attached as exhibits thereto).
</TABLE> 

                                       49
<PAGE>
 
<TABLE>
<CAPTION>
        EXHIBIT                                                                                        PAGE
        NUMBER                                         DESCRIPTION                                    NUMBER
        ------                                         -----------                                    ------
          <C>             <S>                                                                       <C>
         10.34+[X]         Form of Stock Subscription Agreement made by and between VP
                           Holding and each of Arlene Silverman, Kevin McGrain, Kevin
                           Doyle and certain other management investors who purchased
                           common stock of VP Holding under the Subscription Plan with cash
                           and, in certain cases, promissory note (with forms of Secured
                           Promissory Note and Stock Pledge Agreement attached as exhibits
                           thereto).

          10.35***[X]      Addendum dated February 18, 1994 to Stock Subscription
                           Agreement between VP Holding and Jules Silbert.

          10.36***[X]      Stock Subscription Agreement made and entered into as of May 27,
                           1994 by and between VP Holding and William C. Johnson.

          10.37+[X]        1993 Performance Partnership Unit Option Plan of the Partnership
                           (the "1993 Option Plan").

          10.38+[X]        Form of Performance Partnership Unit Option Agreement entered
                           into by and between the Partnership and each of Peter J. Canzone,
                           Sheila R. Garelik, Robert A. Pulciani, Richard L. Bennett, William
                           G. Brosius, Bruce G. Clark, Jules Silbert, Loida Noriega-Wilson and
                           Jessie Bourneuf under the 1993 Option Plan.

         10.39+[X]         Form of Performance Partnership Unit Option Agreement entered
                           into by and between the Partnership and each of Arlene Silverman,
                           Kevin McGrain, Kevin Doyle and certain other participants under
                           the 1993 Option Plan.

         10.40***[X]       Performance Partnership Unit Option Agreement entered into as of
                           May 27, 1994 by and between the Partnership and William C.
                           Johnson.

         10.41@@@@[X]      Form of Amendment to Performance Partnership Unit Option
                           Agreement under the 1993 Option Plan.

         10.42@[X]         1995 Partnership Unit Option Plan of the Partnership (the "1995
                           Option Plan").

         10.43@[X]         Form of Partnership Unit Option Agreement entered into by and
                           between the Partnership and each of Peter J. Canzone, Sheila R.
                           Garelik, Robert A. Pulciani, Richard L. Bennett, William G.
                           Brosius, Bruce G. Clark, Arlene Silverman, Jules Silbert, Loida
                           Noriega-Wilson, Jessie Bourneuf and William C. Johnson under the
                           1995 Option Plan.

         10.44@[X]         Form of Partnership Unit Option Agreement entered into by and
                           between the Partnership and each of Kevin McGrain, Kevin Doyle
                           and certain other participants under the 1995 Option Plan.

         10.45@@@@[X]      Brylane Inc. 1996 Senior Management Stock Subscription Plan (the
                           "Senior Management Plan").

         10.46@@@@[X]      Form of Stock Subscription Agreement entered into by and between
                           Brylane Inc. and nine management investors who were issued
                           Common Stock of Brylane Inc. under the Senior Management Plan.

         10.47@@@@[X]      Form of Stock Subscription Agreement entered into by and between
                           Brylane Inc. and William C. Johnson under the Senior Management
                           Plan
</TABLE> 

                                       50
<PAGE>
 
<TABLE>
<CAPTION> 
            Exhibit                                                                                 Page
            Number                                 Description                                     Number
            -------                                -----------                                     ------ 
         <C>                <S>  

          10.48@@@@[X]       Brylane Inc. 1996 Stock Subscription Plan (the "Brylane
                             Subscription Plan").
 
          10.49@@@@[X]       Form of Stock Subscription Agreement entered into by and between
                             Brylane Inc. and certain management employees who were issued
                             Common Stock of Brylane Inc. under the Brylane Subscription Plan.

          10.50@@@@[X]       Brylane Inc. 1996 Performance Stock Option Plan (the "Brylane
                             1996 Performance Option Plan").

          10.51#####[X]      Brylane Inc. 1998 Performance Stock Option Plan.

          10.52@@@@[X]       Form of Stock Option Agreement entered into by and between
                             Brylane Inc. and certain participants under the Brylane 1996
                             Performance Option Plan.

          10.53@@@@[X]       Form of Stock Option Agreement entered into by and between
                             Brylane Inc. and William C. Johnson under the Brylane 1996
                             Performance Option Plan.

          10.54#####[X]      Brylane Inc. 1996 Stock Option Plan, as amended April 1998 (the
                             "Brylane 1996 Option Plan").

          10.55@@@@[X]       Form of Stock Option Agreement entered into by and between
                             Brylane Inc. and certain participants under the Brylane 1996 Option
                             Plan.

          10.56#####[X]      Form of Amendment to Stock Option Agreements entered into by
                             and between Brylane Inc. and each of Peter J. Canzone, Robert A.
                             Pulciani, Sheila R. Garelik and Jules Silbert.

          10.57#####[X]      Form of Amendment to Stock Option Agreements entered into by
                             and between Brylane Inc. and each of Dhananjaya K. Rao and Carol
                             Meyrowitz.

          10.58@             License Agreement effective as of March 1, 1994 by and between
                x            the Partnership and Sears Shop At Home Services, Inc. ("Sears")
                             (with Exhibits E and F attached thereto).
 
          10.59@             License Agreement effective as of August 1, 1994 by and between
                x            WearGuard Corporation ("WearGuard") and Sears (with Exhibits E
                             and F attached thereto).
 
          10.60@             First Amendment to License Agreement effective as of August 1,
                             1995 by and between Sears and WearGuard.

          10.61@@@@          License Amendment made as of July 23, 1996 between the
               xxx           Partnership and Sears.
 
          10.62#####         Second Amendment to License Agreement entered into effective
                             March 1, 1998 by and between Sears and the Company.

          10.63@@            Asset Purchase Agreement dated September 22, 1995 by and among
                             the Partnership, WearGuard and ARAMARK Corporation
                             ("ARAMARK"), as guarantor.

          10.64@@            Letter Amendment to the Purchase Agreement dated September 22,
                             1995 by and between the Partnership and WearGuard.

          10.65@             Consent to Assignment dated October 10, 1995 between and among
                             Sears, WearGuard and KingSize Catalog Sales, L.P. ("KingSize
                             Partnership").
</TABLE> 

                                       51
<PAGE>
 
<TABLE>
<CAPTION> 
            Exhibit                                                                                 Page
            Number                                 Description                                     Number
            -------                                -----------                                     ------ 
         <C>                <S>  
          10.66@@            Letter Amendment to the Purchase Agreement dated October 16,
                             1995 by and between the Partnership and WearGuard.

          10.67@@            Assignment of Purchase Agreement dated October 16, 1995 by and
                             among the Partnership, KingSize Partnership and K.S. Management.

          10.68@@            Transition Services Agreement dated as of October 16, 1995 by and
                             among the Partnership, KingSize Partnership, ARAMARK and
                             WearGuard.

          10.69@@            Noncompetition Agreement dated as of October 16, 1995 by and
                             among the Partnership, KingSize Partnership, ARAMARK and
                             WearGuard.

          10.70#####[X]      Form of Employment Agreement dated as of April 1, 1998
                             between B.L. Management and each of Peter J. Canzone, Robert A.
                             Pulciani, Jules Silbert, Kevin Doyle, Loida D. Noriega-Wilson and
                             Kevin McGrain.

          10.71#####[X]      Form of Employment Agreement dated as of April 1, 1998
                             between B.L. Management and each of Sheila Garelik and Arlene
                             Silverman.

          10.72#####[X]      Form of Employment Agreement dated as of April 1, 1998
                             between the Partnership and each of Richard Bennett, William
                             Brosius, Daniel L. Carr, Bruce Clark, Robert Evans, Lawrence
                             Kinney and Henry Wren.

          10.73@@@@          Asset Purchase Agreement dated as of October 18, 1996 by and
                             among TJX, Chadwick's and the Partnership.

          10.74@@@@          Amendment Number One to the Asset Purchase Agreement made as
                             of the 9th day of December, 1996 among TJX, Chadwick's and the
                             Partnership.

          10.75@@@@          Asset Purchase Agreement dated as of October 18, 1996 by and
                             among CDM Corp. and the Partnership.

          10.76@@@@          Services Agreement dated as of December 9, 1996 between TJX and
                             the Partnership.

          10.77@@@@@         Amendment to Services Agreement dated as of December 9, 1996
                             between TJX and the Partnership.

          10.78@@@@          Inventory Purchase Agreement effective as of December 9, 1996 by
               xxx           and between the Partnership and TJX.
 
          10.79#####[X]      Form of Employment Agreement dated as of April 1, 1998
                             between the Partnership and each of Dhananjaya K. Rao and Carol
                             Meyrowitz.

          10.80@@@@[X]       VP Holding Stock Subscription Agreement for Preferred Stock made
                             as of December 9, 1996 by and between VP Holding and
                             Dhananjaya K. Rao.

          10.81@@@@[X]       VP Holding Stock Subscription Agreement for Preferred Stock made
                             as of December 9, 1996 by and between VP Holding and Carol
                             Meyrowitz.

          10.82@@@@[X]       Form of Brylane Inc. Stock Subscription Agreement for Preferred
                             Stock made as of December 9, 1996 by and between Brylane Inc.
                             and each of Dhananjaya K. Rao and Carol Meyrowitz.
</TABLE> 

                                       52
<PAGE>
 
<TABLE>
<CAPTION> 
            Exhibit                                                                                 Page
            Number                                 Description                                     Number
            -------                                -----------                                     ------ 
         <C>                <S>  
          10.83@@@@          Brylane, L.P. Convertible Subordinated Note Due 2006 dated
                             December 9, 1996 made by the Partnership in favor of Chadwick's
                             (with Brylane Inc. and Brylane, L.P. Convertible Subordinated Note
                             Due 2006 made by Brylane Inc. and the Partnership in favor of
                             Chadwick's filed as an exhibit thereto).

           10.84@@@@         Unit Subscription Agreement entered into as of December 5, 1996
                             by and among the Partnership, VP Holding, FSEP II, FSEP III,
                             FSEP International, VGP, VLP, WearGuard, Leeway and NYNEX.

           10.85@@@@         Accounts Receivable Purchase Agreement dated as of December 9,
                             1996 between the Partnership and Alliance Data Systems
                             Corporation.

           10.86@@@@@@@      Form of Repurchase Agreement entered into as of September 29,
                             1997 by and between the Company and each of FSEP II, FSEP III,
                             FSEP International, M&P Distributing Company, WearGuard, TJX,
                             Leeway & Co., NYNEX and William C. Johnson.

           10.87###          Stock Purchase Agreement among FSEP II, FSEP III, FSEP
                             International and PPR dated as of February 19, 1998.

           10.88###          Stock Purchase Agreement among M&P Distributing Company and
                             PPR dated as of February 19, 1998.

           10.89####         Governance Agreement by and between the Company and PPR
                             dated as of April 3, 1998.

           10.90####         Registration Rights Agreement dated as of April 3, 1998 between
                             the Company and PPR.
  
           21.1#####         Subsidiaries of Brylane Inc./Brylane, L.P.

           23.1#####         Consent of Coopers & Lybrand L.L.P. regarding Brylane Inc.

           27.1#####         Financial Data Schedule for fiscal year ended January 31, 1998.
 
           27.2#####         Restated Financial Data Schedule for quarter ended May 3, 1997.

           27.3#####         Restated Financial Data Schedule for quarter ended August 2, 1997.

           27.4#####         Restated Financial Data Schedule for quarter ended November 1, 1997.
</TABLE>
_______________
+              Filed as an exhibit to the Partnership's Registration Statement
               on Form S-4 (Registration No. 33-69532) on September 29, 1993 and
               incorporated by reference herein.
++             Filed as an exhibit to Amendment No. 1 to the Partnership's
               Registration Statement on Form S-4 (Registration No. 33-69532) on
               November 9, 1993 and incorporated by reference herein.
+++            Filed as an exhibit to Amendment No. 2 to the Partnership's
               Registration Statement on Form S-4 (Registration No. 33-69532) on
               November 23, 1993 and incorporated by reference herein.
*              Filed on April 25, 1994 as an exhibit to the Partnership's Annual
               Report on Form 10-K for the fiscal year ended January 29, 1994
               and incorporated by reference herein.
**             Filed on June 8, 1994 as an exhibit to the Partnership's
               Quarterly Report on Form 10-Q for the quarterly period ended
               April 30, 1994 and incorporated by reference herein.
***            Filed as an exhibit to Brylane Inc.'s Registration Statement on
               Form S-1 (Registration No. 33-86154) on November 9, 1994 and
               incorporated by reference herein.
****           Filed as an exhibit to Amendment No. 1 to Brylane Inc.'s
               Registration Statement on Form S-1 (Registration No. 33-86154) on
               January 11, 1995 and incorporated by reference herein.
@              Filed on December 12, 1995 as an exhibit to the Partnership's
               Quarterly Report on Form 10-Q for the quarterly period ended
               October 28, 1995 (the "1995 Third Quarter Form 10-Q") and
               incorporated by reference herein.

                                       53
<PAGE>
 
@@             Filed on December 30, 1995 as an exhibit to the Partnership's
               Amendment of Current Report on Form 8-K/A (File No. 33-69532) and
               incorporated by reference herein.
@@@            Filed on May 3, 1996 as an exhibit to the Partnership's Annual
               Report on Form 10-K for the fiscal year ended February 3, 1996
               ("1995 Form 10-K") and incorporated by reference herein.
@@@@           Filed as an exhibit to Amendment No. 2 to Brylane Inc.'s
               Registration Statement on Form S-1 (Registration No. 33-86154) on
               December 23, 1996 and incorporated by reference herein.
@@@@@          Filed as an exhibit to Amendment No. 3 to Brylane Inc.'s
               Registration Statement on Form S-1 (Registration No. 33-86154) on
               January 29, 1997 and incorporated by reference herein.
@@@@@@         Filed as an exhibit to Amendment No. 4 to Brylane Inc.'s
               Registration Statement on Form S-1 (Registration No. 33-86154) on
               February 19, 1997 and incorporated by reference herein.
@@@@@@@        Filed as an exhibit to Amendment No. 1 to the Company's
               Registration Statement on Form S-1 (Registration No. 333-35715)
               on September 30, 1997 and incorporated by reference herein.
@@@@@@@@       Filed as an exhibit to Amendment No. 2 to the Company's
               Registration Statement on Form S-1 (Registration No. 333-35715 on
               October 14, 1997 and incorporated by reference herein.
x              Certain portions of this exhibit have been omitted from the
               copies incorporated by reference from the Partnership's 1995
               Third Quarter Form 10-Q (as defined herein) and are the subject
               of an order granting confidential treatment with respect thereto.
xx             Certain portions of this exhibit have been omitted from the
               copies incorporated by reference from the Partnership's 1995 Form
               10-K (as defined herein) and are the subject of an order granting
               confidential treatment with respect thereto.
xxx            Certain portions of this exhibit have been omitted from the
               copies filed as part of Amendment No. 2 to Brylane Inc.'s
               Registration Statement on Form S-1 and are the subject of a
               request for confidential treatment with respect thereto.
#              Filed on May 2, 1997 as an exhibit to the Company's Annual Report
               on 10-K for the fiscal year ended February 1, 1997 and
               incorporated by reference herein.
##             Filed on June 17, 1997 as an exhibit to the Company's Quarterly
               Report on 10-Q for the quarterly period ended May 3, 1997 and
               incorporated by reference herein.
###            Filed on March 4, 1998 as an exhibit to the Company's Current
               Report on Form 8-K and incorporated by reference herein.
####           Filed on April 17, 1998 as an exhibit to the Company's Current
               Report on Form 8-K and incorporated by reference herein.
#####          Filed herewith.
[X]            Management contract or executive compensation plan or 
               arrangement.

                                       54
<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Shareholders
Brylane Inc.

        We have audited the accompanying consolidated balance sheets of Brylane
Inc. (the "Company"), including Brylane, L.P., a limited partnership, as of
February 1, 1997 and January 31, 1998, and the related consolidated statements
of income, cash flows and partnership/stockholders' equity of the Company for
the years ended February 3, 1996, February 1, 1997, and January 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

        In our opinion, the consolidated financial statements of the Company
referred to above present fairly, in all material respects, the consolidated
financial position of the Company as of February 1, 1997 and January 31, 1998,
and the consolidated results of operations and cash flows for the years ended
February 3, 1996, February 1, 1997, and January 31, 1998, in conformity with
generally accepted accounting principles.



                                                        COOPERS & LYBRAND L.L.P.

Indianapolis, Indiana
March 27, 1998, except for
 Note 16, as to which the date
 is April 3, 1998

                                      F-1
<PAGE>
 
                                  BRYLANE INC.
                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                   FEBRUARY 1,    JANUARY 31,
                                                                                      1997           1998
                                                                                   -----------    -----------
<S>                                                                               <C>            <C> 
                                                ASSETS                          
CURRENT ASSETS:                                                                 
  Cash and cash equivalents.....................................................    $   3,285      $   5,083
  Deferred receivables, net of allowance for doubtful accounts of               
   $1,975 and $1,474, respectively..............................................       18,082          8,194
  Accounts receivable, other....................................................       36,775          7,851
  Inventories...................................................................      168,821        219,553
  Paper inventory...............................................................        9,790         23,571
  Catalog costs.................................................................       31,222         28,411
  Other.........................................................................        6,252          6,426
                                                                                    ---------      ---------
    TOTAL CURRENT ASSETS                                                              274,227        299,089
Property and equipment, net.....................................................       75,970         77,095
Organization and deferred financing costs.......................................       11,114          4,832
Intangibles and other assets....................................................      343,243        328,487
Deferred income taxes...........................................................           --         10,697
Deferred offering costs.........................................................          680             --
                                                                                    ---------      ---------
    TOTAL ASSETS                                                                    $ 705,234      $ 720,200 
                                                                                    =========      =========
                                                                                
                          LIABILITIES AND EQUITY                                
                          ----------------------                                
CURRENT LIABILITIES:                                                            
  Accounts payable..............................................................    $  93,928      $ 139,480
  Accrued interest..............................................................        8,612          7,153
  Accrued expenses..............................................................       45,356         27,528
  Income taxes payable..........................................................           --          4,024
  Reserve for returns...........................................................       18,603         17,844
  Revolving line of credit-current portion......................................           --         19,000
  Current portion of long-term debt.............................................       26,000         10,000
                                                                                    ---------      ---------
    TOTAL CURRENT LIABILITIES                                                         192,499        225,029
                                                                                
Long-term debt..................................................................      401,362        329,753
Other long-term liabilities.....................................................        6,010          9,010
                                                                                    ---------      ---------
    TOTAL LIABILITIES                                                                 599,871        563,792
                                                                                
Convertible redeemable preferred stock..........................................        1,500          1,370
                                                                                
Partnership/stockholders' equity:                                               
  General partner of Brylane, L.P., 2,562,500 units.............................       25,625             --
  Limited partners of Brylane, L.P., 12,908,945 units at February 1, 1997.......      159,855             --
  Common stock, $.01 par value 40,000,000 shares authorized; 19,910,519 
   shares issued and 17,410,519 shares outstanding..............................           --            199
 
  Additional paid in capital....................................................           --        303,260
  Reduction for predecessor cost - carryover basis..............................     (152,067)      (152,067)
  Loans to management investors.................................................       (2,490)        (1,025)
  Retained earnings.............................................................       72,940        119,671
  Treasury stock, 2,500,000 shares at cost......................................           --       (115,000)
                                                                                    ---------      ---------
     Total partnership/stockholders' equity.....................................      103,863        155,038
                                                                                    ---------      ---------
    TOTAL LIABILITIES AND EQUITY                                                    $ 705,234      $ 720,200
                                                                                    =========      =========
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
   statements.

                                      F-2
<PAGE>
 
                                  BRYLANE INC.
                       CONSOLIDATED STATEMENTS OF INCOME
             (IN THOUSANDS, EXCEPT SHARES AND PER UNIT/SHARE DATA)

<TABLE>
<CAPTION>
                                                                                     FISCAL YEAR ENDED
                                                                          ----------------------------------------
                                                                          FEBRUARY 3,    FEBRUARY 1,   JANUARY 31,
                                                                              1996          1997          1998
                                                                          -----------    ------------  ----------- 
                                                                          (53 WEEKS)
<S>                                                                       <C>            <C>           <C>
Net Sales..............................................................      $601,055    $   705,353   $ 1,314,839
Cost of goods sold.....................................................       298,983        348,229       677,639
                                                                             --------    -----------   ----------- 
Gross margin...........................................................       302,072        357,124       637,200
 
Operating expenses:
 Catalog and advertising...............................................       174,446        186,985       302,232
 Fulfillment...........................................................        37,333         55,450       124,372
 Support services......................................................        37,024         54,422        89,260
 Intangibles and organization cost amortization........................         4,707          6,518        10,972
                                                                             --------    -----------   ----------- 
Total operating expenses...............................................       253,510        303,375       526,836
 
Operating income.......................................................        48,562         53,749       110,364
Interest expense, net..................................................        20,624         24,026        27,707
                                                                             --------    -----------   ----------- 
Income before income taxes and extraordinary charge....................        27,938         29,723        82,657
 
Provision for income taxes (Note 4)....................................            88            315        31,545
                                                                             --------    -----------   ----------- 
Income before extraordinary charge.....................................        27,850         29,408        51,112
 
Extraordinary charge related to early retirement of debt, net of tax...            --          2,456         4,077
                                                                             --------    -----------   ----------- 
Net income.............................................................      $ 27,850    $    26,952   $    47,035
                                                                             ========    ===========   =========== 
Basic earnings per unit/share:
 Income per unit/share before extraordinary charge.....................                  $      2.22   $      2.75
 Extraordinary charge per unit/share...................................                         0.19          0.22
                                                                                         -----------   ----------- 
 Net income per unit/share.............................................                  $      2.03   $      2.53
                                                                                         ===========   =========== 
Diluted earnings per unit/share:
 Income per unit/share before extraordinary charge.....................                  $      2.05   $      2.67
 Extraordinary charge per unit/share...................................                         0.17          0.21
                                                                                         -----------   ----------- 
 Net income per unit/share.............................................                  $      1.88   $      2.46
                                                                                         ===========   =========== 
Weighted average units/shares outstanding:
 Basic.................................................................                   13,270,220    18,606,048
 Diluted...............................................................                   14,389,835    19,412,973
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
   statements.

                                      F-3
<PAGE>
 
                                  BRYLANE INC.
                 CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
             (IN THOUSANDS, EXCEPT SHARES AND PER UNIT/SHARE DATA)
<TABLE>
<CAPTION>
                                                                                                   FISCAL YEAR ENDED
                                                                                       ----------------------------------------
                                                                                       FEBRUARY 3,    FEBRUARY 1,   JANUARY 31,
                                                                                          1996            1997         1998
                                                                                       -----------    -----------   -----------
                                                                                        (53 WEEKS)
<S>                                                                                   <C>            <C>           <C>
Supplemental data (Note 4):
  Historical income before provision for income taxes and extraordinary
   charge....................................................................          $    27,938    $    29,723   $    82,657

  Supplemental provision for income taxes....................................               10,337         10,998        30,996
                                                                                       -----------    -----------   -----------

  Supplemental income before extraordinary charge............................               17,601         18,725        51,661

  Extraordinary charge related to early retirement of debt, net of tax.......                   --          1,547         4,077
                                                                                       -----------    -----------   -----------

  Supplemental net income....................................................          $    17,601    $    17,178   $    47,584
                                                                                       ===========    ===========   ===========

Supplemental basic earnings per unit/share:
  Income per unit/share before extraordinary charge..........................          $      1.39    $      1.41   $      2.78
  Extraordinary charge per unit/share........................................                   --           0.12          0.22
                                                                                       -----------    -----------   -----------
  Net income per unit/share..................................................          $      1.39    $      1.29   $      2.56
                                                                                       ===========    ===========   ===========

Supplemental diluted earnings per unit/share:
  Income per unit/share before extraordinary charge..........................          $      1.36    $      1.31   $      2.69
  Extraordinary charge per unit/share........................................                   --           0.11          0.21
                                                                                       -----------    -----------   -----------
  Net income per unit/share..................................................          $      1.36    $      1.20   $      2.48
                                                                                       ===========    ===========   ===========

Weighted average units/shares outstanding:
  Basic......................................................................           12,658,144     13,270,220    18,606,048
  Diluted....................................................................           12,933,969     14,389,835    19,412,973
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
   statements.

                                      F-4
<PAGE>
 
                                  BRYLANE INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                       FISCAL YEAR ENDED
                                                                                          ------------------------------------------
                                                                                           FEBRUARY 3,    FEBRUARY 1,    JANUARY 31,
                                                                                              1996           1997           1998
                                                                                          ------------   ------------   ------------
                                                                                           (53 WEEKS)
<S>                                                                                       <C>            <C>            <C>
OPERATING ACTIVITIES:
  Net income..............................................................................   $ 27,850      $  26,952      $  47,035
  Impact of other operating activities on cash flows:
    Depreciation..........................................................................      3,650          4,821         10,376
    Non-recurring inventory charge........................................................        569          1,657          3,315
    Extraordinary charge related to early retirement of debt..............................         --          2,456          6,524
    Non-cash compensation expense.........................................................         --          2,400            700
    Deferred income taxes.................................................................         --             --          8,168
    Amortization:
      Intangibles and organization costs..................................................      4,707          6,518         10,972
      Deferred financing costs and discount on notes......................................      1,566          1,700          1,190
    Changes in operating assets and liabilities:
      Accounts receivable.................................................................       (549)       (15,137)        10,007
      Inventories.........................................................................     (4,019)       (32,064)       (54,047)
      Catalog costs and paper inventory...................................................     (8,933)        (2,492)       (10,970)
      Accounts payable and accrued expenses...............................................        479         16,262         27,600
      Accrued interest....................................................................        831          2,246         (1,459)
      Income taxes payable................................................................         --             --          4,024
      Other assets and liabilities........................................................      7,411         (2,296)         3,169
                                                                                             --------      ---------      ---------
 Net cash provided by operating activities................................................     33,562         13,023         66,604
                                                                                             --------      ---------      ---------

INVESTING ACTIVITIES:
  Purchase price adjustment related to Chadwick's acquisition.............................         --             --         32,888
  Cash payment in connection with the Chadwick's Acquisition, net of cash acquired........         --       (222,951)            --
  Cash payments in connection with the KingSize Acquisition, net of cash acquired.........    (51,975)            --             --
  Acquisition related fees and expenses paid at closing...................................     (1,278)        (6,215)            --
  Capital expenditures....................................................................     (7,290)        (3,932)       (12,740)
                                                                                             --------      ---------      ---------
Net cash (used in) provided by investing activities.......................................    (60,543)      (233,098)        20,148
                                                                                             --------      ---------      --------- 
 
FINANCING ACTIVITIES:
  Payments on bank credit facilities......................................................    (22,524)      (107,476)      (591,162)

  Proceeds from issuance of long-term debt................................................     35,000        283,000        416,663
  Proceeds from borrowing under revolver..................................................         --          5,000        115,500
  Equity contributions from partners......................................................         --         51,329             --
  Proceeds from issuance of preferred stock...............................................         --          1,500             --
  Proceeds from initial public offering...................................................         --             --         96,000
  Offering and debt issuance fees and expenses............................................         --         (7,685)        (9,564)
  Tax distributions to partners...........................................................     (6,562)        (9,854)            --
  Purchase of treasury stock..............................................................         --             --       (115,000)
  Other...................................................................................         41             77          2,609
                                                                                             --------      ---------      --------- 
Net cash provided by (used in) financing activities.......................................      5,955        215,891        (84,954)
                                                                                             --------      ---------      --------- 
Cash and cash equivalents, at beginning of year...........................................     28,495          7,469          3,285
                                                                                             --------      ---------      ---------
Cash and cash equivalents, at end of year.................................................   $  7,469      $   3,285      $   5,083
                                                                                             ========      =========      =========
 
Supplemental disclosure of cash flow information:
  The amounts of interest and income taxes paid during each of the periods presented
   were not material except as follows:
    Interest paid during the fiscal years ended...........................................   $ 19,328      $  20,581      $  29,736
                                                                                             ========      =========      =========
    Income taxes paid.....................................................................                                $  14,505
                                                                                                                          =========
 
Supplemental disclosure of noncash financing activity:
  Purchase price for KingSize acquisition, net of acquisition costs.......................   $ 57,750
  Cash portion of purchase price..........................................................     52,500
                                                                                             -------- 
  Partnership units issued for purchase...................................................   $  5,250
                                                                                             ======== 
  Purchase price for Chadwick's acquisition, net of acquisition costs (See note 3)........                $ 242,954
  Cash portion of purchase price..........................................................                  222,954
                                                                                                          ---------
  Convertible note........................................................................                $  20,000
                                                                                                          =========
  Conversion of note into shares of common stock..........................................                               $   9,705
                                                                                                                         =========
  Conversion of preferred stock to common stock...........................................                               $     130
                                                                                                                         =========
</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-5
<PAGE>
 
                                  BRYLANE INC.
          CONSOLIDATED STATEMENTS OF PARTNERSHIP/STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                          GENERAL PARTNER
                                                                          LIMITED PARTNERS          COMMON STOCK          ADDITIONAL
                                                                    ---------------------------  ---------------------     PAID IN
                                                                        UNITS         AMOUNT        SHARES     AMOUNT      CAPITAL
                                                                    ------------  ------------   -----------  --------  ------------
<S>                                                                  <C>            <C>           <C>           <C>      <C>
Balance, January 28, 1995......................................       12,547,500     $ 125,475            --        --           --
   Net income..................................................               --            --            --        --           --
   Sale of units...............................................          365,000         5,475            --        --           --
   Repurchase of units.........................................          (10,000)         (121)           --        --           --
   Tax distributions payable to partners.......................               --            --            --        --           --
                                                                    ------------  ------------   -----------  --------  -----------
Balance, February 3, 1996......................................       12,902,500       130,829            --        --           --
   Net income..................................................               --            --            --        --           --
   Sale of units...............................................        2,573,945        51,441            --        --           --
   Repurchase of units.........................................           (5,000)          (60)           --        --           --
   Exchange of stock options...................................               --         3,270            --        --           --
   Tax distributions payable to partners.......................               --            --            --        --           --
                                                                    ------------  ------------   -----------  --------  -----------
Balance, February 1, 1997......................................       15,471,445       185,480            --        --           --
   Net income..................................................               --            --            --        --           --
   Tax distributions made to partners..........................               --            --            --        --           --
   Proceeds from Initial Public Offering.......................               --            --     4,000,000      $ 40    $  95,960
   Initial Public Offering expenses............................               --            --            --        --       (8,850)
   Exchange of partnership units for common stock..............      (15,471,445)     (185,480)   15,471,445       155      185,325
   Purchase of treasury stock..................................               --            --    (2,500,000)       --     (115,000)
   Recognition of deferred tax asset and opening income tax
     adjustments...............................................               --            --            --        --       18,142
   Repayment of management notes...............................               --            --            --        --           --
   Conversion of convertible note..............................               --            --       352,908         4        9,701
   Conversion of preferred stock...............................               --            --         6,500        --          130
   Exercise of stock options...................................               --            --        79,666        --        1,144
   Tax benefit related to issuance of shares under employee
     benefit plans.............................................               --            --            --        --        1,008
   Exchange of stock options...................................               --            --            --        --          700
                                                                    ------------  ------------   -----------  --------  -----------
Balance, January 31, 1998......................................                0     $       0    17,410,519      $199    $ 188,260
                                                                    ============  ============   ===========  ========  ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                    REDUCTION FOR
                                                                     PREDECESSOR         LOANS TO
                                                                   COST-CARRYOVER       MANAGEMENT         RETAINED
                                                                        BASIS            INVESTORS         EARNINGS         TOTAL
                                                                  ----------------    --------------   ---------------   ----------
<S>                                                                <C>                <C>              <C>               <C>
Balance, January 28, 1995.......................................      $(152,067)         $(2,453)         $ 30,822        $   1,777
   Net income...................................................             --               --            27,850           27,850
   Sale of units................................................             --             (112)               --            5,363
   Repurchase of units..........................................             --               50                --              (71)
   Tax distributions payable to partners........................             --               --            (7,732)          (7,732)
                                                                      ---------          -------          --------        ---------
Balance, February 3, 1996.......................................       (152,067)          (2,515)           50,940           27,187
   Net income...................................................             --               --            26,952           26,952
   Sale of units................................................             --               25                --           51,466
   Repurchase of units..........................................             --               --                --              (60)
   Exchange of stock options....................................             --               --                --            3,270
   Tax distributions payable to partners........................             --               --            (4,952)          (4,952)
                                                                      ---------          -------          --------        ---------
Balance, February 1, 1997.......................................       (152,067)          (2,490)           72,940          103,863
   Net income...................................................             --               --            47,035           47,035
   Tax distributions made to partners...........................             --               --              (304)            (304)
   Proceeds from Initial Public Offering........................             --               --                --           96,000
   Initial Public Offering expenses.............................             --               --                --           (8,850)
   Exchange of partnership units for common stock...............             --               --                --               --
   Purchase of treasury stock...................................             --               --                --         (115,000)
   Recognition of deferred tax asset and opening income
     tax adjustments............................................             --               --                --           18,142
   Repayment of management notes................................             --            1,465                --            1,465
   Conversion of convertible note...............................             --               --                --            9,705
   Conversion of preferred stock................................             --               --                --              130
   Exercise of stock options....................................             --               --                --            1,144
   Tax benefit related to issuance of shares under
     employee benefit plans.....................................             --               --                --            1,008
   Exchange of stock options....................................             --               --                --              700
                                                                      ---------          -------          --------        ---------
Balance, January 31, 1998.......................................      $(152,067)         $(1,025)         $119,671        $ 155,038
                                                                      =========          =======          ========        =========
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-6
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  NATURE OF OPERATIONS:

     Brylane Inc., a Delaware corporation ("Brylane" or the "Company"), is a
leading catalog retailer of special-size and regular-size women's and men's
apparel.  The women's catalogs market apparel in the budget and low to moderate
price range and the men's catalogs market apparel in the moderate price range.
Brylane services the special-size customer through its Lane Bryant, Roaman's,
Jessica London and KingSize (men's) catalogs, and the regular-size customer
through its Chadwick's, Lerner, Bridgewater and Brett (men's) catalogs.  Brylane
also markets apparel to these same customer segments through four catalogs which
it distributes under licensing arrangements with Sears Shop at Home Services,
Inc. ("Sears").

     Brylane's merchandising strategy is to provide valued-priced, private label
apparel with a consistent quality and fit, to concentrate on apparel with
limited fashion risk and to offer a broader selection of sizes and styles in
special-size apparel than can be found at most retail stores and in other
competing catalogs.  Each of Brylane's catalogs offers its customers
contemporary, traditional and basic apparel.

(2)  ORGANIZATION AND BASIS OF FINANCIAL STATEMENT PRESENTATION:

Brylane Acquisition

     In August 1993, certain affiliates of Freeman Spogli & Co. Incorporated
("FS&Co.") and of The Limited, Inc. ("The Limited") formed Brylane, L.P. (the
"Partnership"), a Delaware limited partnership, and acquired the Lane Bryant,
Roaman's and Lerner catalog businesses (the "Brylane Acquisition") formerly
conducted by certain direct and indirect subsidiaries of The Limited
("Predecessor"). The aggregate purchase price was $335 million, and for
accounting purposes, the transaction was accounted for on the effective date of
August 1, 1993.

     In connection with the Brylane Acquisition, certain affiliates of FS&Co.
and certain management investors contributed $75 million to the capital of
Brylane for a 60% aggregate interest. Certain affiliates of The Limited
contributed substantially all assets and liabilities of the catalog business to
Brylane and received cash of $285 million and a 40% aggregate interest in
Brylane with an assigned value of $50 million.

     The Brylane Acquisition has been accounted for utilizing the purchase
method of accounting.  The continuing interest of certain affiliates of The
Limited in Brylane was reflected at The Limited's historical basis (carryover
basis).  For the proportionate interests of the affiliates of FS&Co. and members
of management who invested in the transaction, the purchase price was allocated
to the assets and liabilities of Brylane at their estimated fair values as
determined based on management's estimates.  Partners' capital and the basis of
the transferred assets have been reduced for predecessor cost carryover basis.

Initial Public Offering

     On February 26, 1997, in connection with the initial public offering of
Brylane Inc. ("Initial Public Offering"), Brylane, L.P. became a wholly-owned
subsidiary of Brylane Inc. pursuant to the First Amended and Restated
Incorporation and Exchange Agreement (the "Exchange Agreement"), whereby certain
affiliates of FS&Co., The Limited, M&P Distributing Company, WearGuard, Leeway &
Co., and NYNEX exchanged their shares of common stock of VP Holding Corporation
or ownership interests in the Partnership, except for the TJX noteholder ("TJX
Noteholder"), for 14,926,778 shares of $.01 par value common stock ("Common
Stock") of Brylane Inc. (the "Exchange Transaction"). Additionally, pursuant to
their respective stock subscription agreements with VP Holding Corporation,
members of management  and others exchanged their shares of common stock of VP
Holding Corporation for an aggregate of 544,667 shares of Common Stock of
Brylane Inc. In connection with the Exchange Transaction, Brylane, L.P. retained
all of its assets, operations and liabilities.

     Concurrently, Brylane Inc. offered 4,000,000 shares of Common Stock to the
public through its Initial Public Offering.  The historical financial statements
presented herein for periods prior to February 26, 1997 are for

                                      F-7
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Brylane, L.P.  This presentation is consistent with that of Brylane Inc.'s Form
S-1 Registration Statement regarding the Initial Public Offering which contained
the historical financial statements of Brylane, L.P.

Basis of Financial Statement Presentation

     The consolidated financial statements include the accounts of VP Holding
Corporation ("VPH"), VGP Corporation ("VGP"), VLP Corporation ("VLP"), Brylane
L.P. and its wholly-owned subsidiaries and partnerships, including Brylane
Capital Corp., B.L. Management Services, Inc., B.L. Catalog Distribution, Inc.,
B.L. Management Services Partnership, B.L. Catalog Distribution Partnership,
B.N.Y. Services Corp., K.S. Management Services, Inc., C.O.B. Management
Services, Inc. and Chadwick's Tradename Sub, Inc.  These entities are
collectively referred to as Brylane or the Company.  Material transactions
between the consolidated entities have been eliminated.  Each of the wholly-
owned subsidiaries and partnerships of Brylane, L.P. (collectively, the
"Subsidiary Guarantors") has guaranteed the Partnership's Senior Subordinated
Notes due 2003 (the "Notes").  Separate financial statements of these Subsidiary
Guarantors have not been included as the subsidiaries guarantee the Notes on a
full, unconditional, and joint and several basis.  Management believes that the
aggregate assets, liabilities, earnings, and equity of the Subsidiary Guarantors
are currently inconsequential to Brylane on a consolidated basis, both
individually and combined, and that information provided in separate financial
statements of the Subsidiary Guarantors is not deemed material to the readers of
the financial statements.

     Effective July 6, 1996, KingSize Catalog Sales, L.P., and KingSize Catalog
Sales, Inc. were merged into Brylane.  All of the assets and liabilities of
these entities were transferred to Brylane, which continues to run the KingSize
Big & Tall catalog business.

(3)  ACQUISITIONS:

     In October 1995, KingSize Catalog Sales, L.P., an Indiana limited
partnership and an indirect wholly-owned entity of Brylane ("KingSize
Partnership"), completed the acquisition of the assets of the KingSize division
of WearGuard Corporation ("WearGuard"), a wholly-owned subsidiary of ARAMARK
Corporation (the "KingSize Acquisition"). The business acquired  is a catalog
business devoted to big and tall men's apparel, footwear and related
accessories. Brylane, L.P. paid to WearGuard $52.5 million in cash and issued to
WearGuard 350,000 newly issued limited partnership units in Brylane, L.P.
Brylane, L.P. financed the cash portion of the purchase price out of available
funds as well as additional borrowings under its 1993 bank credit facility
("1993 Bank Credit Facility"). The Partnership acquired the inventory,
contracts, customer lists, goodwill, accounts receivable and certain equipment
relating to the operation of the business, assumed certain liabilities, and
entered into a noncompetition agreement.

     For accounting purposes, the KingSize Acquisition was recorded using the
purchase method of accounting as of the effective date of October 1, 1995.
Brylane's financial statements include the results of KingSize on a consolidated
basis from the effective date of the acquisition.  The purchase price, including
acquisition costs of $1.4 million, was allocated to the assets and liabilities
of KingSize at their estimated fair values. The fair values of assets and
liabilities were determined based on management's estimates. The allocation of
the purchase price is as follows (in thousands):

      Current assets.................    $10,737 
      Property and equipment.........        331 
      Intangibles and other assets...     51,903 
      Liabilities assumed............     (3,821)
                                         ------- 
                                         $59,150 
                                         =======  
 
     In December 1996, Brylane, L.P. completed the acquisition of certain assets
of the Chadwick's of Boston catalog division ("Chadwick's") of Chadwick's, Inc.,
a wholly-owned subsidiary of The TJX Companies ("TJX") (the "Chadwick's
Acquisition").  Chadwick's is a catalog business devoted to selling off-price
women's career, casual and social apparel.  The Chadwick's Acquisition included
the purchase of inventory, property, plant and

                                      F-8
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

equipment, customer lists, trademarks, goodwill and the assumption of certain
liabilities relating to the business by the Partnership.  In addition, the
parties entered into a services agreement, as well as an inventory purchase
agreement pursuant to which TJX has committed to purchase certain amounts of
Chadwick's excess inventory through January 2000.

     Brylane, L.P. paid TJX $189.8 million (net of purchase price adjustments of
$32.9 million) and issued to the TJX Noteholder a $20.0 million Convertible
Redeemable Note due 2006 (approximately $9.7 million of which was converted by
TJX into shares of Common Stock sold).  To fund a portion of the cash paid in
connection with the Chadwick's Acquisition and to repay its existing
indebtedness under its 1993 Bank Credit Facility, the Partnership entered into
the 1996 bank credit facility ("1996 Bank Credit Facility") and received
aggregate new equity of $51.3 million from certain affiliates of FS&Co., Leeway
& Co., NYNEX and WearGuard.

     For accounting purposes, the Chadwick's Acquisition has been recorded using
the purchase method of accounting.  Brylane's financial statements include the
results of Chadwick's on a consolidated basis from the closing date of the
acquisition.  The purchase price, reflecting adjustments of $32.9 million and
acquisition costs of $7.1 million, has been allocated to the assets and
liabilities of Chadwick's at their estimated fair values.  The fair values of
assets and liabilities have been determined based on management's estimates.
The allocation of the purchase price is as follows (in thousands):

    Current assets.................    $ 89,990
    Property and equipment.........      45,805
    Intangibles and other assets...     179,734
    Liabilities assumed............     (97,944)
                                       -------- 
                                       $217,585
                                       ======== 

     The following unaudited pro forma results of operations for the year ended
February 1, 1997 assumes that the Chadwick's Acquisition occurred as of February
4, 1996.  In preparing the pro forma information, certain adjustments related to
the Chadwick's Acquisition have been made for (i) the amortization of goodwill
and other intangible assets created in the Chadwick's Acquisition; (ii) the
interest expense on the net increase in indebtedness which was used to finance a
portion of the purchase price; (iii) the sale of deferred billing receivables to
Alliance Data Systems Corporation ("ADS"); (iv) the non-recurring charge related
to the valuation of the acquired inventory; (v) the amortization of deferred
financing fees related to the 1996 Bank Credit Facility and the write-off and
reduction of amortization expense related to the repayment of the 1993 Bank
Credit Facility; and (vi) the elimination of interest expense and federal and
state taxes related to Chadwick's as a division of TJX.

     The pro forma information is provided for informational purposes only.  It
is based on historical information and does not purport to be indicative of the
results that actually would have occurred had the Chadwick's Acquisition been
made as of the indicated date or of results which may occur in the future (in
thousands):

                                 UNAUDITED      
                               FOR THE FISCAL     
                                YEAR ENDED        
                              FEBRUARY 1, 1997    
                              ---------------                                
     Net sales.............      $1,167,527    
     Operating income......          87,118    
     Net income............          49,246    


(4)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and

                                      F-9
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Fiscal Year

     Brylane's fiscal year ends on the Saturday closest to January 31 and
consists of 52 or 53 weeks.  Brylane's fiscal years ended February 1, 1997 and
January 31,1998 consisted of 52 weeks, and the fiscal year ended February 3,
1996 consisted of 53 weeks. The fiscal year is designated in the notes to the
financial statements by the calendar year in which the fiscal year commences.

Cash Equivalents

     Brylane considers amounts on deposit with financial institutions and money
market investments with initial maturities of three months or less to be cash
equivalents.

Accounts Receivable

     Brylane sells eligible accounts receivable generated through Chadwick's
deferred billing programs to ADS (See note (14) "Related Party Transactions").
All sales are accounted for in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities" which was effective for transactions
occurring after December 31, 1996. Costs associated with these transactions are
included in operations. Deferred billing accounts receivable balances are net of
allowance for doubtful accounts of $2.0 million and $1.5 million at February 1,
1997 and January 31, 1998, respectively.

Inventories

     Merchandise inventories are stated at the lower of cost or market,
principally valued on the average cost basis under a standard costing system or
using the retail method of accounting, except for inventories attributable to
the initial investment in KingSize and Chadwick's which were recorded at
estimated fair value (unallocated costs). A non-recurring inventory charge
representing the estimated fair value in excess of its original historical cost,
as of the date of the KingSize Acquisition, was fully amortized in fiscal 1995
($.6 million).  A non-recurring inventory charge representing the estimated fair
value, as of the date of the Chadwick's Acquisition, of inventory in excess of
its original historical cost was amortized partly during fiscal year 1996 ($1.7
million) with the remainder being amortized during fiscal year 1997 ($3.3
million).

Catalog Costs

     Catalog costs primarily consist of catalog production and mailing costs
that have not yet been fully amortized.  Catalog costs are amortized over the
expected revenue stream, which is approximately three months from the date
catalogs are mailed as determined based on management's estimates.

Property and Equipment

     Additions to property and equipment  are recorded at cost. Depreciation and
amortization of property and equipment are computed for financial reporting
purposes on a straight-line basis, using service lives ranging principally from
10-30 years for buildings and improvements, the lesser of 10 years or the life
of the lease for leasehold improvements and 3-10 years for other property and
equipment. The cost and related accumulated depreciation or amortization of
assets sold or retired are removed from the accounts, with any resulting gain or
loss included in net income.  Repairs and maintenance are charged to expense as
incurred; renewals and betterments which extend service lives are capitalized.
The Company's policy is to expense as incurred internally developed software
costs.

                                      F-10
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Organization and Deferred Financing Costs

     Organization costs of $.3 million relate to the formation of Brylane and
its wholly-owned subsidiaries and partnerships.  Such costs are amortized over
five years using the straight-line method.  Original deferred financing costs of
$11.8 million incurred in connection with the Brylane Acquisition were
capitalized and amortized over the term of the related debt using the effective
interest method. In connection with the repayment of the 1993 Bank Credit
Facility in December 1996, a pro rata portion of the deferred financing fees of
$2.5 million associated with the obligations to be repaid were written off as a
charge to operations.  The remaining balance continues to be amortized over the
remaining life of the related obligations. Deferred financing costs of $7.0
million incurred in connection with the 1996 Bank Credit Facility were
capitalized and amortized over the term of the related debt using the effective
interest method. In connection with the repayment of the 1996 Bank Credit
Facility in April 1997, deferred financing fees of $4.1 million (net of related
taxes) were written off as a charge to operations.  Deferred financing costs of
$1.2 million incurred in connection with the amended 1997 bank credit facility
("Amended 1997 Bank Credit Facility") were capitalized and are amortized over
the term of the related debt using the effective interest method.  Accumulated
amortization of organization and deferred financing costs at February 1, 1997
and January 31, 1998 were $5.5 million and $6.1 million, respectively.

Intangible Assets

     Intangible assets associated with the Brylane Acquisition include
trademarks of  $8.8 million, customer lists of $2.2 million and goodwill of
$114.5 million.  Subsequent to October 4, 1997 in connection with the repurchase
of common stock, the amortization of the remaining trademark agreement of $7.6
million was accelerated to a ten-year period in accordance with the provisions
of the trademark agreement. Such intangibles are amortized over a 30-year
composite life using the straight-line method.  Accumulated amortization of
intangible assets was $14.6 million, and $18.9 million at February 1, 1997, and
January 31, 1998, respectively. Intangible assets associated with the KingSize
Acquisition include customer lists of $.5 million, a noncompetition agreement of
$.3 million, and goodwill of $50.8 million.  Amortization is computed using the
straight-line method over a life of eight years for the customer lists, five
years for the noncompetition agreement, and 40 years for goodwill.  Accumulated
amortization was $1.9 million and $3.3 million, at February 1, 1997, and January
31, 1998, respectively.  Intangible assets associated with the Chadwick's
Acquisition include customer lists of $4.0 million and goodwill of $175.7
million. Amortization is computed using the straight-line method over a life of
five years for the customer lists and 40 years for goodwill.  Accumulated
amortization was $.9 million and $6.1 million at February 1, 1997 and January
31, 1998, respectively.

     Brylane's policy is to periodically review the value assigned to goodwill
to determine if it has been permanently impaired by adverse conditions which
might affect Brylane.  Such reviews include an analysis of current results and
take into consideration the discounted value of projected operating cash flow
(earnings before interest, taxes and depreciation and amortization).

Income Taxes

     Under the partnership form of doing business, the tax effects of profits
and losses of the Partnership were incurred by the partners.  Brylane made cash
advances and annual distributions to partners in amounts sufficient for the
partners to pay income taxes on their ratable share of taxable income.  As a
result, the provision for income taxes for the years ended February 3, 1996 and
February 1, 1997 represents federal, state and local income taxes relating only
to taxable income of the C-corporations included in the consolidated financial
statements of Brylane, L.P.

     Subsequent to the Initial Public Offering on February 26, 1997, the tax
status of the consolidated entity, Brylane Inc., was changed to that of a C-
corporation.  Brylane Inc. follows Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS No. 109) which requires the Company
to establish a deferred tax liability or asset for the future tax effects of
temporary differences between book and taxable income.

                                      F-11
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in future tax rates will result in immediate adjustments to deferred
taxes.  Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.  Income tax expense is the tax
payable or refundable for the period plus the change during the period in
deferred tax assets and liabilities.

Revenue Recognition

     Sales are recorded at the time of shipment.  Brylane provides a reserve for
estimated merchandise returns, based on its prior customer returns experience.

Net Income Per Share

     In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, Earnings per Share, which replaces the presentation of primary
earnings per share ("EPS") with basic EPS and replaces fully diluted EPS with
diluted EPS. Basic net income per share is based on the weighted average number
of common shares outstanding during each period and diluted net income per share
is based on the weighted average number of common shares and dilutive common
share equivalents outstanding during each period. The Company's common share
equivalents consist of shares of common stock issuable upon exercise of
outstanding stock options, the conversion of preferred shares into common shares
and the conversion of a convertible note into shares of common stock.
Application of this standard resulted in a decrease in the weighted average
number of shares outstanding for basic EPS due to the exclusion of the common
stock equivalents identified above.  The statement is effective for financial
statements for both interim and annual periods ending after December 15, 1997,
with earlier application not permitted. All periods presented reflect the
adoption of SFAS No. 128. (See note (10) "Earnings Per Share").

Supplemental Net Income and Earnings per Share

     Supplemental net income of Brylane Inc. represents the results of
operations adjusted to reflect a provision for income tax on historical income
before income taxes, which gives effect to the change in the consolidated
entities tax status to a C-corporation subsequent to the public sale of its
Common Stock.  The difference between the pro forma income tax rates utilized
and the federal statutory rate of 35% relates primarily to state income taxes,
net of federal tax benefit.

     Supplemental earnings per share of Brylane Inc. represents supplemental net
income divided by the weighted average partnership units outstanding prior to
the Initial Public Offering and the weighted average common stock and equivalent
units outstanding thereafter.  In accordance with Securities and Exchange
commission rules, options granted in the one year prior to the filing of the
registration statement related to the Initial Public Offering are included as
outstanding for all periods presented using the treasury stock method assuming
the offering price of $24 per share.

Stock Option Plan

     In October 1995, the FASB issued SFAS No. 123, "Accounting for Awards of
Stock-Based Compensation to Employees", which is effective for fiscal years
beginning after December 15, 1995.  SFAS No.123 provides alternative accounting
treatment to Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees", with respect to stock-based compensation and
requires certain additional disclosures.  Brylane adopted the disclosure
requirements of SFAS No. 123 in the first quarter of 1996, but has elected to
continue to measure compensation costs following present accounting rules under
APB Opinion No. 25. (See note (8) "Stock Option Plans").

                                      F-12
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reclassifications

     Certain reclassifications have been made to the previous years' financial
statements to conform with the 1997 financial statement presentation.  Such
reclassifications had no effect on previously reported net income.

(5)  PROPERTY AND EQUIPMENT:

     Property and equipment are recorded at cost.  Property and equipment
consist of (in thousands):
<TABLE>
<CAPTION>
                                                        February 1,   January 31,
                                                           1997          1998      
                                                        -----------   -----------
         <S>                                               <C>           <C>          
         Land, buildings and improvements............       $42,455       $42,540  
         Furniture, fixtures and equipment...........        44,184        53,043  
         Leasehold improvements......................         2,397         2,732  
                                                            -------       -------
                                                             89,036        98,315  
         Accumulated depreciation and amortization...        13,066        21,220  
                                                            -------       -------
         Property and equipment, net.................       $75,970       $77,095   
                                                            =======       ======= 
</TABLE>

(6)  LONG-TERM DEBT:

     To finance the Brylane Acquisition, Brylane secured financing through
proceeds from the 1993 Bank Credit Facility and the sale of the Notes. In
connection with the Chadwick's Acquisition, Brylane repaid the 1993 Bank Credit
Facility and entered into a 1996 Bank Credit Facility. On April 30, 1997,
Brylane entered into a 1997 bank credit facility which it amended on October 20,
1997, the Amended 1997 Bank Credit Facility.  The Amended 1997 Bank Credit
Facility and Notes are fully and unconditionally guaranteed, jointly and
severally, by  the Subsidiary Guarantors.

Amounts outstanding under long-term debt agreements are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                                  FEBRUARY 1,      JANUARY 31,
                                                                                                      1997             1998
                                                                                                -------------      -----------
<S>                                                                                            <C>                 <C>
 1996 Bank Credit Facility ("Tranche A Term Loan"), bearing interest at the rate of (i) a          
  margin over the higher of prime rate or federal funds rate plus 0.5% or (ii) a margin
  over LIBOR.  At February 1, 1997, the rate was LIBOR plus 2.0%.  Various maturities 
  through 2001................................................................................     $213,000           $    --

 1996 Bank Credit Facility Tranche B Term Loan ("Tranche B Term Loan"), bearing interest             
  at (i) a margin over the higher of prime rate or federal funds rate plus 0.5% or (ii) a
  margin over LIBOR.  At February 1, 1997 the rate was LIBOR plus 2.5%.  Various
  maturities through February 2003............................................................       70,000                --

 1996 Bank Credit Facility revolving loan ("1996 Revolving Credit Facility"), maximum                    
  borrowings of $125,000, sublimit for letters of credit $75,000..............................           --                --

 Amended 1997 Bank Credit Facility ("Term Loan"), bearing interest at (i) a margin over                  
  the higher of prime rate or the federal funds rate plus 0.5% or (ii) a margin over 
  LIBOR.  At January 31, 1998, the rate was LIBOR plus 1.25%.  Various maturities through
  August 2002.................................................................................           --           175,000
 
 Amended 1997 Bank Credit Facility revolving loan ("Revolving Credit Facility"), maximum                 
  borrowings of $200,000 sublimit for letters of credit $75,000 and sublimit for
  swingline loans $15,000.....................................................................           --            49,000 

 Convertible subordinated note, bearing interest at the rate of 6% per annum, maturing               
  December 9, 2006............................................................................       20,000            10,295

 Senior subordinated notes, bearing interest at the rate of 10.0% per annum, maturing               
  September 1, 2003...........................................................................      125,000           125,000
                                                                                                   --------          -------- 
                                                                                                    428,000           359,295
  Discount on senior subordinated notes.......................................................         (638)             (542)
                                                                                                   --------          -------- 
                                                                                                    427,362           358,753
  Less current portion........................................................................      (26,000)          (29,000)
                                                                                                   --------          -------- 
                                                                                                   $401,362          $329,753
                                                                                                   ========          ======== 
</TABLE>

                                      F-13
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     In addition to scheduled maturities on the Term Loan, Brylane is obligated
to make certain mandatory prepayments of the loans and the Revolving Credit
Facility under certain circumstances.  Mandatory prepayment of the Term Loan is
based on Brylane, L.P.'s excess cash flow, as defined. Mandatory prepayments, if
any, are applied to reduce the principal amount of the Term Loan.

     At February 1, 1997, and January 31, 1998, interest terms available to
Brylane for borrowings similar to the Term Loan and the Convertible Subordinated
Note were similar to those presently provided under the Amended 1997 Bank Credit
Facility and the Convertible Subordinated Note.  Accordingly, the recorded
obligations under the Term Loan and the Convertible Subordinated Note
approximated the fair value at February 1, 1997 and January 31, 1998.

     Based on quoted market prices at February 1, 1997 and January 31, 1998 the
fair market value of the Notes was approximately $130.3 million and $132.7
million, respectively.  The change in fair market value is primarily
attributable to changes in bond ratings and market interest rates.

     The 1996 Bank Credit Facility contained certain financial covenants which
required Brylane to meet financial ratios and tests, including a minimum
adjusted net worth test, a minimum fixed charge coverage ratio and a minimum
cash flow to net debt ratio.  In addition, the 1996 Bank Credit Facility
contained covenants customarily found in credit agreements of such type
including, among other things, limitations on indebtedness, liens, asset sales,
distributions and other restricted payments, acquisitions, mergers, investments,
capital expenditures and prepayment or amendment of certain indebtedness. At
February 1, 1997, Brylane was in compliance with the required covenants.

     The Amended 1997 Bank Credit Facility contains certain financial covenants
which require Brylane to meet financial ratios and tests, including a maximum
debt to cash flow ratio, a minimum fixed charge coverage ratio, and a minimum
net worth test.  In addition, the Amended 1997 Bank Credit Facility contains
covenants customarily found in credit agreements including, among other things,
limitations on indebtedness, liens, Asset Sales (as defined), partnership
distributions and other restricted payments, mergers and certain acquisitions,
investments, transactions with affiliates, capital expenditures, the prepayment
or amendment of certain indebtedness, the granting of certain negative pledges
and the amendment of material agreements.  At January 31, 1998, Brylane was in
compliance with the required covenants.

     The obligations of Brylane under the Amended 1997 Bank Credit Facility are
collateralized by the intangible assets of the Partnership.

     As of February 1, 1997, Brylane had no borrowings under the Revolving
Credit Facility and as of January 31, 1998, Brylane had $49.0 million in
borrowings under the Revolving Credit Facility.  After giving effect to the
issuance of letters of credit for $47.9 million and $49.1 million, respectively,
Brylane had additional capacity under the Revolving Credit Facility of
approximately $77.1 million and $101.9 million, respectively.  As of February 1,
1997 and January 31, 1998, the aggregate principal balance outstanding under the
Term Loans of the 1996 and Amended 1997 Bank Credit Facility was $283.0 million
and $224.0 million, respectively.

     At January 31, 1998, annual maturities of long-term debt by fiscal year are
as follows (in thousands):

                 1998...........          $ 10,000
                 1999...........            20,000
                 2000...........            40,000
                 2001...........            70,000
                 2002...........            84,000
                 Thereafter.....           135,295
                                          --------                
                 Total debt.....          $359,295
                                          ======== 

                                      F-14
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7)  OPERATING LEASES:

     Brylane leases office, outlet store and warehouse space and equipment under
leasing arrangements classified as operating leases which expire at various
times through fiscal 2012.  Rent expense under these leases was $5.8 million,
$6.6 million and $8.7 million in the fiscal years 1995, 1996, and 1997,
respectively.

     Future minimum lease payments required under these leases at January 31,
1998, are as follows  (in thousands):

                   1998.........   $ 8,991
                   1999.........     8,033
                   2000.........     6,348
                   2001.........     4,849
                   2002.........     4,248
                   Thereafter...    20,244
                                   ------- 
                                   $52,713
                                   ======= 

(8)  STOCK OPTION PLANS:

1996 Performance Option Plan

     In connection with the Initial Public Offering, the Company adopted the
Brylane Inc. 1996 Performance Stock Option Plan (the "Brylane 1996 Performance
Option Plan"), which acts as the successor to the Partnership's 1993 Performance
Partnership Unit Option Plan (as amended, the "1993 Option Plan") which was
adopted in connection with the Brylane Acquisition.  An aggregate of 779,584
shares of Common Stock have been reserved for issuance under the Brylane 1996
Performance Option Plan.

     In connection with the Chadwick's Acquisition, the Board of Representatives
of the Partnership authorized an amendment to the existing option agreement that
revised the performance criteria for the vesting of the options, and changed the
outside vesting date of the options from August 30, 2008 to August 30, 2002 and
reduced the term from 16 to 10 years.  In addition, the exercise price of the
options outstanding under the 1993 Option Plan was increased from $10.00 per
partnership unit to $15.00 per partnership unit.  In accordance with APB Opinion
No. 25, the options were deemed to have a new measurement date.  Based on the
new measurement date, the Partnership incurred non-cash compensation expense of
$2.4 million in the fourth quarter of 1996 and $0.7 million in fiscal 1997.
Unless canceled due to termination of employment, all options became exercisable
on January 31, 1998 and terminate 10 years from date of grant.

<TABLE>
<CAPTION>
                                                     1995         1996       1997
                                                     ----         ----       ----
<S>                                               <C>         <C>         <C>
Outstanding at beginning of year.................  615,209      622,709    644,584
Granted..........................................   15,000      669,584         --
Cancelled........................................   (7,500)    (647,709)   (25,000)
                                                  --------     --------   --------        
Outstanding at end of year.......................  622,709      644,584    619,584
                                                  ========     ========   ========                              
Options exercisable at year-end..................       --           --    619,584
 
Weighted-average fair value of options granted 
 during the year................................. $   9.71     $   9.99         -- 
</TABLE>

                                      F-15
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1996 Option Plan

     In connection with the Initial Public Offering, the Company adopted the
Brylane Inc. 1996 Stock Option Plan (the "Brylane 1996 Option Plan"), which acts
as the successor of the Partnership's 1995 Partnership Unit Option Plan (as
amended, the "1995 Option Plan") which was adopted in connection with the
Brylane Acquisition. As amended, an aggregate of 1,700,000 shares of Common
Stock have been reserved for issuance under the Brylane 1996 Option Plan. Other
than as described below, unless canceled due to termination of employment, all
options become exercisable in three equal annual installments on the first,
second and third anniversaries of the date of original grant.

     In connection with the Chadwick's Acquisition, Chadwick's employees were
granted substitute options in exchange for options previously granted by TJX.
The term, exercise price and vesting criteria of the replacement options were
determined to preserve the economic value of the options being exchanged. The
granting of the options resulted in an adjustment to the Chadwick's Acquisition
purchase price of $0.9 million for the related compensation expense.

     A summary of Brylane's 1996 Option Plan as of February 3, 1996, February 1,
1997 and January 31, 1998, and changes during the years ending on those dates is
presented below:


<TABLE>
<CAPTION>
                                                      1995                    1996                       1997
                                               -------------------   ---------------------     -----------------------
                                                         WEIGHTED-               WEIGHTED-                   WEIGHTED-
                                                          AVERAGE                 AVERAGE                    AVERAGE 
                                                         EXERCISE                 EXERCISE                   EXERCISE
                                                UNITS      PRICE     UNITS         PRICE        SHARES        PRICE  
                                               --------  ---------   -------     ---------     --------      ---------
<S>                                            <C>         <C>       <C>         <C>           <C>         <C>
                                                                              
Outstanding at beginning of year............        --               123,750        $15.00       464,604       $16.50
Granted.....................................   123,750      $15.00   340,854         17.04       268,597        35.92
Cancelled...................................        --                    --                     (32,686)       18.58
Exercised...................................        --                    --                     (79,666)       14.34
                                               -------               -------                     -------               
Outstanding at end of year..................   123,750       15.00   464,604         16.50       620,849        25.07

Options exercisable at year-end.............        --                41,250                     123,387       
                                                                                                               
Weighted-average fair value of options                                        
   granted during the year..................                $ 5.81                  $ 9.69                     $11.58 
</TABLE>


     The following table summarizes information about the 1996 Option Plan at
January 31, 1998:

<TABLE>
<CAPTION>
                                          OPTIONS OUTSTANDING
--------------------------------------------------------------------------------------------
                                    NUMBER           WEIGHTED-AVERAGE
                                OUTSTANDING AT     REMAINING CONTRACTUAL     WEIGHTED-AVERAGE
 RANGE OF EXERCISE PRICES      JANUARY 31, 1998            LIFE               EXERCISE PRICE 
--------------------------    ------------------  ----------------------    ------------------
<S>                           <C>                    <C>                      <C>
       $ 5 to 10                      26,435             7.7 years                $ 6.05
       $11 to 15                     110,091             4.6 years                 15.00
       $16 to 30                     226,073             6.8 years                 18.95
       $31 to 41                     258,250             6.4 years                 36.10
                                     -------
       $ 5 to 41                     620,849             6.3 years                 25.07
                                     =======
</TABLE>

                                      F-16
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                            OPTIONS EXERCISABLE
      ------------------------------------------------------------------
                                 NUMBER EXERCISABLE     WEIGHTED-AVERAGE 
      RANGE OF EXERCISE PRICES   AT JANUARY 31, 1998     EXERCISE PRICE
      ------------------------   -------------------    ----------------
<S>                             <C>                    <C>          
              $ 5 to 10                   5,679             $ 7.46
              $11 to 15                  68,008              15.00
              $16 to 20                  49,700              19.26
                                        -------
              $ 5 to 20                 123,387              16.37
                                        =======
</TABLE>

Pro Forma Disclosures Under Statement of Financial Accounting Standards No. 123

    Pro forma information regarding net income as required by SFAS No. 123 has
been determined as if Brylane accounted for its stock options under the fair
value approach.  The fair value of each option is estimated on the date of grant
using the Black-Scholes model with the following assumptions:

<TABLE>
<CAPTION>
                                                      1995    1996    1997
                                                      ----    ----    ----   
<S>                                                  <C>     <C>     <C>
Weighted-average risk-free interest rate...........   5.99%   6.04%   5.87%
Weighted-average expected life (years).............   5.00    5.25    3.99
Expected volatility................................   31.2%   31.2%   28.5%
</TABLE>

    Had compensation costs been determined based on the fair value method of
SFAS No. 123, the Company's net income would have been adjusted to the pro forma
amounts indicated below.  For purposes of pro forma disclosures, the estimated
fair value of the options is amortized to expense over the options vesting
period (in thousands).

<TABLE>
<CAPTION>
                                                 1995       1996       1997
                                                 ----       ----       ----
<S>                                            <C>        <C>        <C>  
Net income:                        
   As reported..............................    $27,850    $26,952    $47,035
   Pro forma................................     27,658     28,351     45,283
Basic net income per unit/share:   
   As reported..............................               $  2.03    $  2.53
   Pro forma................................                  2.14       2.43
Diluted net income per unit/share: 
   As reported..............................               $  1.88    $  2.46
   Pro forma................................                  1.97       2.33
</TABLE>

    The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable.  In addition, the Black-Scholes option valuation model
requires the input of highly subjective assumptions including the expected stock
price volatility.  Because Brylane options have characteristics significantly
different from those of traded options, and because changes in subjective
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not provide a reliable single measure of the
fair value of its stock options.  The pro forma disclosures provided above may
not be representative of the effects on reported net income for future years.

                                      F-17
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) STOCK SUBSCRIPTION PLAN:

    In connection with the Initial Public Offering, the Company adopted the
Brylane Inc. 1996 Stock Subscription Plan (the "Brylane Subscription Plan")
which is the successor of the Brylane, L.P. Subscription Plan, whereby officers,
certain key employees and a member of the Board of Directors may purchase
interests in Brylane Inc.  The portion of the purchase price received in the
form of promissory notes is recorded as a reduction of stockholders' equity.
The price at which the units are purchased is set at fair value at the date of
issuance.

    Activity under the Stock Subscription Plan for fiscal 1995, fiscal 1996 and
fiscal 1997 follows:

<TABLE>
<CAPTION>
                                                             AVERAGE  
                                            NUMBER OF       PRICE PER 
                                           UNITS/SHARES     UNIT/SHARE 
                                          --------------   -----------
<S>                                       <C>              <C>
Units outstanding, January 28, 1995....        500,500         $ 10.00   

Activity during 1995:                                                    
   Issued..............................         15,000           15.00   
   Repurchased.........................        (10,000)          12.10   
                                              --------         -------     
Units outstanding, February 3, 1996....        505,500           10.15   

Activity during 1996:                                                    
   Issued..............................          7,500           15.00   
   Repurchased.........................         (5,000)          12.10   
                                              --------         -------     
Units outstanding, February 1, 1997....        508,000           10.22   

Activity during 1997:                                                    
   Issued..............................             --              --   
   Repurchased.........................             --              --   
   Shares sold.........................       (160,022)                  
                                              --------         -------     
Shares outstanding, January 31, 1998...        347,978         $ 10.22   
                                              ========         =======   
</TABLE>   

(10) EARNINGS PER SHARE:

    As discussed in Note (4) above, SFAS No. 128 replaces the presentation of
primary and fully diluted earnings per share with basic and diluted earnings per
share, and requires dual presentation of basic and diluted earnings per share on
the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic earnings per share computation to the numerator and denominator of the
diluted earnings per share computation.  All periods presented reflect the
adoption of SFAS No. 128.  The impact on amounts previously reported was not
material.

                                      F-18
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                       FEBRUARY 1,           JANUARY 31,
                                                                          1997                  1998
                                                                     ---------------       ---------------
                                                                     (IN THOUSANDS, EXCEPT SHARE AND PER
                                                                               UNIT/SHARE DATA)
<S>                                                                      <C>                <C>           
Basic EPS Computation:
  Numerator.......................................................       $    26,952         $    47,035
                                                                         ===========         ===========
  Denominator:
     Weighted average common units/shares outstanding.............        13,270,220          18,606,048
                                                                         ===========          ==========
Basic EPS.........................................................       $      2.03         $      2.53
Diluted EPS Computation:
  Numerator:                                                             $    26,952         $    47,035
     Interest on convertible debt, net of income taxes............               108                 645
                                                                         -----------         -----------
     Adjusted numerator...........................................       $    27,060         $    47,680
                                                                         ===========         ===========
  Denominator:
     Weighted average common units/shares outstanding.............        13,270,220          18,606,048
     Convertible redeemable preferred stock.......................            75,000              68,500
     Convertible debt.............................................           727,273             364,060
     Incremental units/shares from assumed exercise of  options...           317,342             374,365
                                                                          ----------          ----------
     Total units/shares...........................................        14,389,835          19,412,973
                                                                          ==========          ==========
Diluted EPS.......................................................       $      1.88         $      2.46
</TABLE>

(11)  RETIREMENT PLAN:

  Effective August 30, 1993, Brylane adopted the Brylane, L.P. Savings and
Retirement Plan (the "Retirement Plan").  All of the Company's employees who
have attained twenty-one years of age and have completed one year of service are
eligible to participate in the Retirement Plan.  Eligible employees can
contribute up to the lesser of $9,500 or ten percent of their compensation to
the Retirement Plan on a pre-tax basis.  Brylane will match up to three percent
of the participants' eligible compensation.  Brylane is required to make
additional contributions to the Retirement Plan equal to four percent of each
participant's compensation up to the Social Security taxable wage base and equal
to seven percent of each participant's compensation which exceeds that amount.
An additional one percent of eligible compensation is contributed on behalf of
those participants who have completed at least five years of service. Brylane's
contributions begin to vest after three years of service, at which time such
contributions are 20% vested.  Thereafter, the contributions vest at a rate of
20% each year so that Brylane's contributions are fully vested after seven years
of service.  Brylane's cost under these plans was  $2.9 million, $3.6 million
and $5.9 million in the fiscal years 1995, 1996, and 1997, respectively.

  As a result of the Chadwick's Acquisition, Brylane participates in a multi-
employer plan that provides defined benefits to its union employees.  Brylane's
expense for this plan for the eight-weeks ended February 1, 1997 and the year
ended January 31, 1998 amounted to $252,750 and $1.8 million, respectively.

                                     F-19
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(12)  INCOME TAXES:

  The provision for income taxes consisted of (in thousands):

<TABLE>
<CAPTION>
                                                       1997
                                                     --------- 
<S>                                                 <C>
Current:
  Federal........................................    $  21,219
  State..........................................        2,158
Deferred:
  Federal........................................        7,642
  State..........................................          526
                                                     ---------
Total provision..................................    $  31,545
                                                     ========= 
</TABLE>

  Reconciliation between the Federal statutory rate of 35% to income before
income taxes and the income tax provision is as follows (in thousands):

<TABLE>
<CAPTION>
                                                       1997
                                                     ---------
<S>                                                 <C> 
Computed income taxes at statutory rate...........   $  28,930
State taxes net of Federal benefit................       2,066
Other.............................................         549
                                                     ---------
  Income taxes....................................   $  31,545
                                                     =========
</TABLE>

  The significant components of net deferred tax assets and deferred tax
liabilities included on the balance sheet at January 31, 1998 are (in
thousands):

<TABLE>
<CAPTION>
                                                       1997
                                                     --------
<S>                                                 <C>
Deferred tax asset:
  Inventory.......................................   $  6,957
  Deferred and other compensation related items...      5,096
  Intangibles.....................................      8,815
  Fixed assets....................................        417
  Other...........................................      1,129
                                                     --------    
  Total deferred tax assets.......................     22,414
                                                     --------
Deferred tax liability:
  Prepaid catalog costs and other prepaids........    (11,659)
  Other...........................................        (58)
                                                     -------- 
  Total deferred tax liability....................    (11,717)
                                                     --------
Net deferred tax asset............................   $ 10,697
                                                     ========
</TABLE>

A tax benefit of $1.0 million associated with the exercise of employee stock
options was recorded in equity in 1997.

                                      F-20
<PAGE>
 
                                 BRYLANE INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(13)  CONVERTIBLE REDEEMABLE PREFERRED STOCK:

  In connection with the Chadwick's Acquisition, certain members of Chadwick's
management purchased 75,000 shares of VP Holding Corporation Series A
Convertible Redeemable Preferred Stock for a purchase price of $1.5 million.
These shares were converted to shares of Convertible Redeemable Preferred Stock
of Brylane Inc. upon consummation of the Exchange Transaction.  The shares of
Brylane Inc. Series A Convertible Redeemable Preferred Stock vest in three equal
annual installments beginning one year from the date of purchase and may not be
transferred or redeemed at the option of the holder for three years from their
date of purchase; thereafter, they may be transferred only after first offering
such shares to Brylane Inc. The redemption price has been set at $20 per share
(as appropriately adjusted for stock dividends, reclassifications or splits).
One third of the Brylane Inc. Series A Convertible Redeemable Preferred Stock
vested on December 9, 1997.  Six thousand five hundred shares were converted to
common stock.

(14)  RELATED PARTY TRANSACTIONS:

  On August 30, 1993 (amended July 1, 1995), Brylane entered into a Credit Card
Agreement with World Financial Network National Bank ("World Financial") a
wholly-owned subsidiary of ADS, a joint venture 60% owned by affiliates of Welsh
Carson Anderson & Stowe and 40% owned by The Limited, Inc., pursuant to which
World Financial provides credit to customers of Brylane, issues five proprietary
credit cards and processes credit card transactions for a fee.  The total
expense amounted to $10.3 million, $10.0 million and $10.1 million in fiscal
1995, 1996, and 1997, respectively.  In addition, Brylane sold accounts
receivable to ADS and incurred discount and processing fees of $142,000 and
$14.1 million in the fiscal years 1996 and 1997, respectively.

  Certain affiliates of The Limited granted Brylane the use of certain
trademarks for a specified period, as defined in a trademark license agreement.

   In connection with the Chadwick's Acquisition, Brylane paid FS Management Co.
and FS&Co. Management L.P., both of which are affiliated with FS&Co., an
aggregate of $2.5 million in fees as compensation for services in structuring
and arranging financing. Such fees are included in intangibles and other assets.

(15)  COMMITMENTS AND CONTINGENCIES:

  Brylane is involved in various legal proceedings that are incidental to the
conduct of its business.  Although the amount of any liability with respect to
these proceedings cannot be determined, in the opinion of management after
consultation with legal counsel, any such liability will not have a material
adverse effect on the financial position or results of operations of Brylane.

  The Company is under audit by the Indiana Department of Revenue ("IDR") and
anticipates an assessment will be issued.  Based on discussions with the IDR,
the Company currently projects that the assessment, adjusted for the federal tax
benefit, will aggregate approximately $2.3 million including interest.  The
Company intends to vigorously contest this assessment, and believes it has made
adequate provision such that final settlement of its Indiana tax liability for
the years under audit will not have a material adverse effect on its
consolidated financial statements.

(16)  SUBSEQUENT EVENT:

  On April 3, 1998, Brylane announced that Pinault-Printemps-Redoute, S.A.
("PPR"), of France, a leading retailer of consumer goods and distributor of
electrical supplies, completed the purchase of approximately 43.7% of the Common
Stock of Brylane for $51 per share from Freeman Spogli & Co. Incorporated and
The Limited, Inc. as well as certain other shareholders, including certain
members of management.  PPR, listed on the Paris Bourse, is the parent company
of La Redoute, the largest catalog retailer in France.

                                      F-21