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

                                  FORM 10-K

      [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

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

                      Commission File Number:  33-86690


                         STAR MARKETS COMPANY, INC.
------------------------------------------------------------------------------
           (Exact name of registrant as specified in its charter)


             MASSACHUSETTS                            04-3243710
----------------------------------------   -----------------------------------
    (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)             Identification Number)



  625 MT. AUBURN STREET, CAMBRIDGE, MA                  02138
----------------------------------------   -----------------------------------
(Address of principal executive offices)              (Zip Code)


                               (617) 528-2550
------------------------------------------------------------------------------
            (Registrant's telephone number, including area code)

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

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 and (2) has been subject to such 
filing requirements for the past 90 days.     Yes  [X]    No  [ ]

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

Aggregate market value of the voting stock held by nonaffiliates of the 
registrant at April 21, 1998:  None

Number of shares of the issuer's common stock, outstanding as of April 21, 
1998:  5,000 shares

Documents incorporated by reference:  None


                                   PART I


Item 1. Business
----------------

Throughout this report, the "Company" or "Star" refers to Star Markets 
Company, Inc. ("Successor"), which acquired the assets and business of the 
Star Market Company operating division of Jewel Food Stores, Inc. 
("Predecessor" or "Star Markets"), a wholly owned subsidiary of American 
Stores Company (the "Parent" or "ASC"). Star Markets Company, Inc., a 
Massachusetts corporation, is a wholly-owned subsidiary of Star Markets 
Holdings, Inc., ("Holdings"), a Massachusetts corporation. Both the Company 
and Holdings were formed for purposes of the acquisition.

Historical financial information of Predecessor is presented as if it 
existed as a separate entity during the periods presented.

The Company is a leading regional food retailer, with 52 stores (at the end 
of fiscal 1997) located in Eastern Massachusetts. Thirty-two of the 
Company's 52 stores are located inside Route 128, an area which includes 
many of the most densely populated and affluent communities in the 
metropolitan Boston area. The Company also operates a wholesale food 
business serving locations in New England and New York. The Company employs 
approximately 10,000  people.

On September 8, 1994, the Company acquired the business and assets of Star 
Markets from ASC (the "Acquisition"). The Company was formed to acquire Star 
Markets on behalf of affiliates of INVESTCORP SA ("Investcorp"), management 
and certain other investors. In connection with the Acquisition, the Company 
acquired rights to expand into certain adjacent store sites and to acquire 
and develop certain additional store sites. In addition, management 
negotiated extensions for a number of its store leases.

Store formats
-------------
The Company currently operates three food retailing formats: superstores, 
conventional stores, and Wild Harvest stores.

Superstores
-----------
The Company's 23 superstores offer a wider range of goods and services than 
its conventional stores. In addition to traditional supermarket offerings, 
the Company's superstores contain most of the following specialty service 
areas: full-service bakeries, delicatessens with prepared foods, self-
service salad bars, floral departments, pharmacies, "Peticulars" pet food 
and accessories departments, "Wild Harvest" natural foods departments, and 
full-service kitchens offering a variety of freshly prepared meal 
selections. Prepared foods include store-cooked meats and poultry, salads 
and baked goods.

During 1997, the Company opened three new superstores, one of which replaced 
a conventional store which closed in 1997.  The Company completed remodels 
at four of its existing superstores during 1997.

Conventional Stores
-------------------
The Company currently operates 25 conventional stores which offer a wide 
selection of national brands and private label products as well as high-
quality produce, meat, seafood, and a select line of general merchandise. 
Conventional stores typically contain one or more specialty service 
departments, such as floral, seafood, bakery or delicatessen. During 1997, 
the Company replaced a conventional store with a new superstore and 
completed remodels at three conventional stores. 

Wild Harvest Stores
-------------------
The Company's four Wild Harvest stores offer an extensive selection of 
natural foods, natural meats and seafood, bulk foods, and fresh fruits and 
vegetables, including certified organic, pesticide-free, conventional and 
locally grown produce. Wild Harvest stores also offer: "Wild Juices," a 
California style juice bar; "Harvest Grain," a scratch bakery where bakers 
make their own dough from unbleached and unbromated flours; a Granola 
Factory where 12 different granolas are made on-site and baked fresh daily; 
"Harvest Table," a selection of healthy, prepared foods for time-starved 
consumers; and a Wellness Department, which offers a complete assortment of 
natural vitamins, nutritional supplements, herbal and homeopathic remedies 
and natural personal care products. In addition to the items mentioned 
above, Wild Harvest stores feature a selection of the most popular grocery 
items sold in traditional supermarkets, allowing consumers one shopping 
destination. The Company opened two new Wild Harvest locations in 1997.

Marketing
---------
The Company's marketing strategy emphasizes its long-standing reputation for 
quality perishable goods and superior customer service. The Company's 
advertising also highlights its broad selection of national brand and 
private label merchandise via weekly circulars and through radio and 
television commercials. The Wild Harvest advertising programs emphasize 
fresh affordable natural foods as well as the convenience of one-stop 
shopping. The Company was the first food retailer in the metropolitan Boston 
area to introduce a card-based marketing and merchandising program designed 
to increase customer loyalty. The Star Advantage Card offers customers 
promotional benefits and eliminates the need to clip Star circular coupons. 
Wild Harvest stores offer the Wild Card with benefits similar to the Star 
Advantage Card. During 1997, the Company continued to utilize both cards, 
which also track customers' purchasing data, to target specific customers 
for certain promotional events.

Information Systems
-------------------
The Company's management information systems and point-of-sale scanning 
technology reduce labor costs attributable to product pricing and customer 
check-out, and provide management with information that facilitates 
purchasing, receiving and management of inventory and accounts payable. The 
Company has point-of-sale scanning technology in all of its stores. All 
stores use electronic systems for employee time and attendance records. The 
Company believes that its information systems enable management to operate 
efficiently in product procurement, store delivery scheduling, inventory 
management and pricing accuracy.

In conjunction with the Acquisition, the Company developed a plan to upgrade 
and/or replace a significant portion of its information systems architecture 
to state-of-the-art technology. During 1997, the Company successfully 
completed the implementation of new core application software within its 
buying, merchandising and inventory management systems for dairy operations 
and non-perishable categories.  The  final phase of the project, the  
implementation of new perishable purchasing and distribution systems and a 
new pricing system, is scheduled for completion in fiscal 1998. 

Distribution
------------
The Company operates a warehouse and distribution complex in Norwood, 
Massachusetts that supplies both the Company's retail and wholesale 
operations with dry grocery, dairy and perishable products. This facility 
provides approximately 14.5 million cubic feet of storage space, or capacity 
for approximately 1.6 million cases of product. Management believes this 
facility has sufficient capacity to support the Company's growth plans over 
the next several years. The Norwood complex is conveniently located within 
the Company's market area and provides efficient distribution of product 
with a fleet of 30 tractors and 417 trailers. The Norwood complex also 
includes a corrugated paper recycling facility that reclaims packaging 
materials from the stores and prepares it for sale to processors of 
corrugated paper products.

Competition
-----------
The retail food industry is highly competitive. It is characterized by 
narrow profit margins and, accordingly, earnings are dependent on high sales 
volume and operating efficiency. The Company's competitors include regional 
and local supermarket chains and natural food stores, independent grocery 
stores, specialty food stores, warehouse club stores, drug stores and 
convenience stores. Supermarket chains generally compete on the basis of 
location, quality of products, service, price, product variety and store 
condition. The Company's principal competitors include Stop & Shop, Shaw's, 
Roche Bros., Bread & Circus, and Demoulas.

Merchandising Programs
----------------------
The Company's merchandising programs are designed to increase gross margins 
and optimize product assortment. The key elements of the Company's 
merchandising strategy are to (i) provide its superstores with a wider range 
of non-grocery items, such as home office products, kitchen and bath items, 
books and magazines and other general merchandise, (ii) introduce high-
quality prepared foods departments, (iii) provide an expanded selection of 
high-quality perishable products from its existing in-store bakeries, 
seafood, floral, and produce departments, (iv) expand the Company's 
offerings of natural, organic and ethnic foods, and (v) establish specialty 
departments, such as juice bars, prepared foods, "Peticulars" pet food and 
accessories departments, and "Wild Harvest" natural food departments, where 
space permits. In addition, the Company is implementing strategies to 
increase its sales of private label products. The Company intends to 
increase sales of private label products by offering a wider range of 
private label products and improving the marketing and merchandising of such 
products. Further, the Company has exclusive distribution rights within its 
trade area for the President's Choice brand of products, a line of high-
quality packaged products.

Wholesale Operations
--------------------
The Company's wholesale operations principally involve the distribution of 
grocery and perishable products to locations in New England and New York. 
Approximately 11 of these locations are contractually allowed to operate 
under the "Star" name, provided that the customer complies with certain 
operating covenants intended to protect the value of the "Star" trade name 
by insuring that the customer's stores are clean and well-run. The existing 
contracts are generally terminable by the Company on 30 days notice. In 
addition to providing product distribution, the Company also offers 
marketing and advertising programs to wholesale customers for an incremental 
charge. The Company does not generally provide financing to its wholesale 
customers, other than payment terms for product purchases.


Item 2. Properties
------------------

At the end of fiscal 1997, the Company owned seven stores, its office in 
Cambridge, Massachusetts and its warehouse and distribution complex in 
Norwood, Massachusetts. In addition, as of the end of fiscal 1997, the 
Company owned one property held for development located in Dorchester, 
Massachusetts. The Company has granted mortgages on all of its real estate 
to the lenders under its Senior Credit Facility to secure the Company's 
obligations thereunder. The Company completed a sale-leaseback transaction 
for one of its operating properties and sold a non-operating property 
located in Rhode Island during 1997.  In March 1998, subsequent to fiscal 
1997, the Company completed a sale-leaseback for two of its operating 
properties and its warehouse and distribution complex.

At the end of fiscal 1997, the Company leased 45 stores throughout the 
metropolitan Boston area and Cape Cod, Massachusetts. The leases for the 45 
stores have an average life of approximately 33 years until final 
expiration. The Company will continue to evaluate additional sale-leaseback 
transactions for properties owned to reduce debt and/or partially finance  
future growth of the Company.


Item 3. Legal Proceedings
-------------------------

From time to time, the Company has been involved in various legal 
proceedings. Management believes that all of such litigation is routine in 
nature and incidental to the conduct of the Company's business, and that 
none of such litigation, if determined adversely to the Company, would have 
a material adverse effect on the financial condition or results of 
operations of the Company.


Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------

No matters were submitted to a vote of security holders during the 13-week 
period ended January 31, 1998.


                                   PART II


Item 5. Market for Registrant's Common Equity and Related Stockholders Matters
------------------------------------------------------------------------------

There is no established public trading market for the Company's common 
equity. The authorized common stock of the Company consists of 10,000 shares 
of common stock, par value $.01 per share ("Common Stock"). At April 21, 
1998, there were 5,000 shares of Common Stock issued and outstanding, all of 
which are held of record by Holdings. All outstanding shares of Common Stock 
are pledged to secure the Company's obligations under its Senior Credit 
Facility and, pursuant to restrictions contained therein, the Company is not 
expected to be able to pay dividends on its Common Stock for the foreseeable 
future, other than certain limited dividends permitted under the Senior 
Credit Facility.

The Company's 13% Senior Subordinated Notes due 2004 (the "Subordinated 
Notes") were issued pursuant to an indenture (the "Indenture") containing 
certain covenants that also restrict the payment of dividends, the 
repurchase of capital stock and the making of other Restricted Payments (as 
defined in such indenture), subject to certain exceptions similar to those 
contained in the Senior Credit Facility.


Item 6. Selected Financial Data
-------------------------------

The following table sets forth summary historical financial data of Star 
Markets and the Company for the five fiscal years ended January 31, 1998. 
For financial statement purposes, the Acquisition was accounted for as a 
purchase effective September 10, 1994. As a result, the Company has adopted 
a new basis of accounting that reflects estimated fair values for assets and 
liabilities at that date.

<TABLE>
<CAPTION>
                                                 Predecessor(1)                                The Company
                                           ---------------------------   ------------------------------------------------------
                                           (52 Weeks)      32-Week         20-Week      (53 Weeks)    (52 Weeks)    (52 Weeks)
                                           Fiscal Year                                  Fiscal Year   Fiscal Year   Fiscal Year
                                              Ended      Period Ended    Period Ended      Ended         Ended         Ended
                                           January 29,   September 10,   January 28,    February 3,   February 1,   January 31,
                                              1994           1994            1995          1996          1997          1998
                                           -----------   -------------   ------------   -----------   -----------   -----------
                                                                         (Dollars in thousands)

<S>                                        <C>            <C>            <C>            <C>           <C>           <C>
Operating Data:
Revenues
  Retail                                   $   716,979    $   427,762    $   268,617    $   763,513   $   877,827   $   965,845
  Wholesale                                    119,326         69,227         39,687         90,991        76,704        68,343
                                           ------------------------------------------------------------------------------------
Total revenues                                 836,305        496,989        308,304        854,504       954,531     1,034,188

Gross profit
  Retail                                       176,408        104,249         65,293        191,418       234,514       267,350
  Wholesale                                      6,156          4,058          2,230          6,273         4,927         5,040
                                           ------------------------------------------------------------------------------------
Total gross profit                             182,564        108,307         67,523        197,691       239,441       272,390

Depreciation and amortization                   12,841          8,295          7,218         19,326        22,178        23,792
Operating income                                29,705         15,266          6,384         19,642        19,949        21,890
Interest expense                                    79             27          9,781         28,382        28,894        30,177
Income (loss) before extraordinary loss         17,476          8,592         (3,507)        (8,890)       (9,336)       (8,565)
Extraordinary loss                                                            (2,094)
Net income (loss)                               17,476          8,592         (5,601)        (8,890)       (9,336)       (8,565)


Store Data (Period End):
Number of stores                                    32             33             33             38            48            52
Total square footage                         1,038,211      1,096,544      1,119,990      1,639,015     2,034,603     2,240,966
Selling square footage                         797,346        842,146        859,773      1,144,486     1,419,013     1,567,976


Balance Sheet Data (Period End):
Total assets                               $   209,445    $   208,084    $   421,355    $   425,503   $   453,270   $   452,542
Long-term debt                                                               240,057        257,400       271,827       276,327
Redeemable preferred stock                                                    10,037         10,134        10,230        10,326

<FN>
--------------------
<F1>  For financial statement purposes, the Acquisition was accounted for as 
      a purchase effective September 10, 1994.  The acquisition resulted in 
      a new basis of accounting reflecting estimated fair values for assets 
      and liabilities at that date.  Accordingly, the financial statements 
      for the periods subsequent to September 10, 1994, are presented on the 
      Company's new basis of accounting, while the financial statements at 
      September 10, 1994 and the prior period are presented on the 
      Predecessor's historical cost basis of accounting.  The assets and 
      business were acquired for an aggregate purchase price of $293.3 
      million, exclusive of related fees and expenses.
</FN>
</TABLE>


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

Fiscal 1997 and Fiscal 1996

Revenues
--------
Revenues from retail operations for the 52-week period ended January 31, 
1998 increased 10.0% to $965.8 million from $877.8 million for the 52-week 
period ended February 1, 1997. The increase in revenues from retail 
operations was due to both an increase in the number of stores operated and 
to increased revenues from existing stores. For stores open more than one 
year ("same store sales"), revenues increased by 0.5% from the prior period. 
Revenues from wholesale operations for the 52-week period ended January 31, 
1998 declined 10.9% to $68.3 million from $76.7 million for the 52-week 
period ended February 1, 1997. The decrease in wholesale revenues was 
primarily due to the loss of certain wholesale accounts which ceased 
operations.

Gross Profit
------------
Gross profit from retail operations for the 52-week period ended January 31, 
1998 increased 14.0% to $267.3 million from $234.5 million for the 52-week 
period ended February 1, 1997 primarily due to the increase in revenues. 
Gross profit as a percentage of revenues for retail operations for the 52-
week period ended January 31, 1998 increased to  27.7% from 26.7% for the 
52-week period ended February 1, 1997. The increase in gross profit as a 
percentage of revenues was primarily attributable to improvements in 
perishable margins and leveraged distribution costs. Gross profit from 
wholesale operations for the 52-week period ended January 31, 1998 increased 
2.3% to $5.0 million from $4.9 million for the 52-week period ended February 
1, 1997. Gross profit as a percentage of revenues for wholesale operations 
for the 52-week period ended January 31, 1998 increased to 7.4% from 6.4% 
for the 52-week period ended February 1, 1997, primarily due to an increase 
in non-perishable gross margin rates, as well as a decrease in distribution 
costs.

Operating and Administrative Expenses
-------------------------------------
Operating and administrative expenses for the 52-week period ended January 
31, 1998 increased by 14.9% to $226.7 million from $197.3 million for the 
52-week period ended February 1, 1997. Operating and administrative expenses 
as a percentage of total revenues for the 52-week period ended January 31, 
1998 increased to 21.9% from 20.7% for the 52-week period ended February 1, 
1997. The increase in operating and administrative expenses as a percentage 
of total revenues was due to an increase in store labor attributable to new 
store formats with additional service intensive departments and an increase 
in rent including both rent for new locations and rent associated with the 
February, 1997 sale-leaseback of one operating location.

Depreciation and Amortization
-----------------------------
Depreciation and amortization expense, which includes the amortization of 
goodwill, was 2.3% of total revenues for the 52-week period ended January 
31, 1998 and the 52-week period ended February 1, 1997

Non-Operating Expenses
----------------------
Interest expense for the 52-week period ended January 31, 1998 increased to 
$30.2 million from $28.9 million for the 52-week period ended February 1, 
1997. The Company recorded state income tax expense of $0.4 million for the 
52-week period ended January 31, 1998 and $0.4 million for the 52-week 
period ended February 1, 1997. The Company did not record a federal or state 
tax benefit associated with the losses recorded in the 52-week period ended 
January 31, 1998 and the 52-week period ended February 1, 1997.

Fiscal 1996 and Fiscal 1995

Revenues
--------
Revenues from retail operations for the 52-week period ended February 1, 
1997 increased 15.0% to $877.8 million from $763.5 million for the 53-week 
period ended February 3, 1996. The increase in revenues from retail 
operations was due to both an increase in the number of stores operated and 
to increased revenues from existing stores. For stores open more than one 
year ("same store sales"), adjusted to reflect a 52-week comparison, 
revenues increased by 3.2% from the prior period. Revenues from wholesale 
operations for the 52-week period ended February 1, 1997 declined 15.7% to 
$76.7 million from $91.0 million for the 53-week period ended February 3, 
1996. The decrease in wholesale revenues was primarily due to the loss of 
certain wholesale accounts which ceased operations due to increased 
competition in their respective trading areas.

Gross Profit
------------
Gross profit from retail operations for the 52-week period ended February 1, 
1997 increased 22.5% to $234.5 million from $191.4 million for the 53-week 
period ended February 3, 1996 primarily due to the increase in revenues. 
Gross profit as a percentage of revenues for retail operations for the 52-
week period ended February 1, 1997 increased to 26.7% from 25.1% for the 53-
week period ended February 3, 1996. The increase in gross profit as a 
percentage of revenues was primarily attributable to an increase in the 
gross margin rate in the perishable categories. Gross profit from wholesale 
operations for the 52-week period ended February 1, 1997 decreased 21.5% to 
$4.9 million from $6.3 million for the 53-week period ended February 3, 
1996. Gross profit as a percentage of revenues for wholesale operations for 
the 52-week period ended February 1, 1997 decreased to 6.4% from 6.9% for 
the 53-week period ended February 3, 1996.

Operating and Administrative Expenses
-------------------------------------
Operating and administrative expenses for the 52-week period ended February 
1, 1997 increased by 24.3% to $197.3 million from $158.7 million for the 53-
week period ended February 3, 1996. Operating and administrative expenses as 
a percentage of total revenues for the 52-week period ended February 1, 1997 
increased to 20.7% from 18.6% for the 53-week period ended February 3, 1996. 
The increase in operating and administrative expenses as a percentage of 
total revenues was attributable to a number of factors:  continued 
investment in increased service levels in the stores; an increase in retail 
operations which incur a higher rate of operating and administrative 
expenses than wholesale operations; an increase in rent expense as a result 
of sale-leaseback transactions which occurred in October 1995 and January 
1996; the acquisition of 10 locations during the period; the opening of the 
two new Wild Harvest stores as well as the operating and administrative 
infrastructure established to support existing and future Wild Harvest 
locations; and additional administrative costs as the Company continues to 
grow.

Depreciation and Amortization
-----------------------------
Depreciation and amortization expense, which includes the amortization of 
goodwill, was 2.3% of total revenues for the 52-week period ended February 
1, 1997 and the 53-week period ended February 3, 1996.

Non-Operating Expenses
----------------------
Interest expense for the 52-week period ended February 1, 1997 increased to 
$28.9 million from $28.4 million for the 53-week period ended February 3, 
1996. The Company recorded state income tax expense of $0.4 million for the 
52-week period ended February 1, 1997 and $0.3 million for the 53-week 
period ended February 3, 1996. The Company did not record a federal or state 
tax benefit associated with the losses recorded in the 52-week period ended 
February 1, 1997 and the 53-week period ended February 3, 1996.

Liquidity and Capital Resources
-------------------------------
The Company's liquidity needs arise primarily from debt service on the 
indebtedness incurred in connection with the Acquisition, the funding of the 
Company's store acquisitions, capital expenditures and working capital 
requirements.

The Company's total indebtedness as of April 21, 1998 was $260.3 million, 
which includes $110.0 million of Subordinated Notes due November 1, 2004, 
$147.3 million due under the Senior Credit Facility, and a $3.0 million note 
payable. The Senior Credit Facility provides for a $108.0 million term loan 
facility and a $75.0 million revolving credit facility. As of April 21, 
1998, the Company had $7.2 million drawn under the letter of credit 
facilities of the Senior Credit Facility and $50.1 million drawn under the 
revolving credit portion of the Senior Credit Facility leaving an aggregate 
of $16.9 million of unused revolving credit availability under the Senior 
Credit Facility. The Company paid $0.7 million in aggregate principal amount 
in 1997. The Company will pay $1.1 million in aggregate principal amount in 
1998.

Capital expenditures for fiscal 1997 were $41.1 million as compared to $54.8 
million in fiscal 1996 and $65.3 million in fiscal 1995. The Company's 
capital expenditures have been funded through cash flow from operations, 
proceeds from sale-leaseback transactions, proceeds from the sale of 
nonoperating properties, and borrowings under the revolving credit portion 
of its Senior Credit Facility. Subsequent to the end of fiscal 1997, the 
Company completed a sale-leaseback transaction for two of its stores and for 
its warehouse and distribution complex for a gross selling price of $21.6 
million.  Of the proceeds, $18.4 million will be used to pay down principal 
on term loans and the balance of $3.2 million will be used for revolver 
paydown and to pay transaction expenses.

The Company currently anticipates making capital expenditures of 
approximately $24.8 million in fiscal 1998. Capital expenditures will 
include opening one new superstore, remodeling two existing stores, 
converting one conventional store to a superstore, and opening up to two new 
Wild Harvest stores. Planned capital expenditures for fiscal 1998 include 
approximately $9.7 million for maintenance, systems, and distribution.

The Company believes that funds generated from operations, proceeds from 
additional sale-leaseback transactions and borrowings under the Senior 
Credit Facility will provide sufficient resources through fiscal 1998 to 
permit it to meet its working capital requirements, to make all interest and 
principal payments due and payable on the Subordinated Notes and its 
existing indebtedness and to fund planned capital expenditures. However, if 
the Company's cash flow and capital resources are insufficient to fund its 
debt service obligations, the Company may be required to reduce or delay 
planned capital expenditures, sell assets, obtain additional equity capital 
or restructure its debt.

Borrowings under the Senior Credit Facility are subject to variable interest 
rates, which could cause the Company to be vulnerable to future increases in 
prevailing interest rates. To the extent that the Company is required to 
dedicate materially greater amounts of its cash flow from operations and 
other capital resources to pay interest on its outstanding indebtedness as a 
result of future interest rate increases, it will reduce the funds available 
for other purposes.

The Company has conducted a review of its computer systems that could be 
affected by the "Year 2000" issue and is developing a plan to resolve 
issues.  The Year 2000 problem is the result of computer programs being 
written using two digits rather than four to define the applicable year.  
Any of the Company's programs that have time-sensitive software may 
recognize the date using "00" as the year 1900 rather than the year 2000.  
This could result in system failures or miscalculations using existing 
software and in converting to new software.  The Year 2000 problem is not 
expected to pose a significant problem for the Company.


Item 8. Consolidated Financial Statements and Supplementary Data
----------------------------------------------------------------

The Consolidated financial statements and supplementary data are included 
under Item 14. of this Report.


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

None.


                                  Part III


Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------

The following table sets forth the name, age and position of each current 
director and executive officer of the Company. Each director of the Company 
will hold office until the next annual meeting of shareholders of the 
Company or until his or her successor has been elected and qualified. 
Officers of the Company are elected by the Board of Directors of the Company 
and serve at the discretion of the Board of Directors. The size of the Board 
of Directors may be increased from time to time.

<TABLE>
<CAPTION>

Name                      Age    Positions
----                      ---    ---------

<S>                       <C>    <C>
Henry J. Nasella          51     Chairman of the Board of Directors, President 
                                 and Chief Executive Officer
Robert R. Spellman        50     Director, Executive Vice President, Administration,
                                 and Chief Financial Officer
Edward Albertian          45     Executive Vice President, Operations and Chief 
                                 Operating Officer
Carole O'Connor Gates     40     Executive Vice President, Marketing
Stephen R. Winslow        38     Senior Vice President, Finance
</TABLE>

Henry J. Nasella became Chairman of the Board of Directors, President and 
Chief Executive Officer of the Company in September 1994 upon the 
consummation of the Acquisition. Prior to joining the Company, Mr. Nasella 
was Chief Executive Officer of Staples, the Office Superstore Division of 
Staples, Inc., a leading office products retailer, during 1993, and 
President of Staples, Inc. from 1988 through 1993. Mr. Nasella is also a 
director of Au Bon Pain Co., Inc.

Robert R. Spellman became a Director, Executive Vice President, 
Administration, and Chief Financial Officer of the Company in October 1994 
upon the consummation of the Acquisition. Prior to joining the Company, he 
served as Senior Vice President, Finance of Staples, Inc. from September 
1988, Secretary of Staples, Inc. from December 1988 through March 1993 and 
was Treasurer of Staples, Inc. from September 1989 through August 1993.

Edward Albertian became Executive Vice President, Operations, and Chief 
Operating Officer in May 1996. He joined the Company in May 1995 as Senior 
Vice President, Operations. Prior to joining the Company, Mr. Albertian 
served as Senior Vice President, Eastern Operations for Staples, Inc. from 
1992.

Carole O'Connor Gates became Executive Vice President, Marketing in April 
1996. She joined the Company in November 1994 as Senior Vice President, 
Marketing. Prior to joining the Company, she served as Senior Vice 
President, Advertising of BayBank, Inc. from January 1990.

Stephen R. Winslow became Senior Vice President, Finance in October 1996.  
Prior to joining the Company, he served as Vice President, 
Finance/Controller, Contract and Commercial Division of Staples, Inc. from 
January 1996.  Mr. Winslow served as Vice President, Planning, Analysis and 
Reporting and Chief Accounting Officer from 1995, and Vice President, 
Planning and Analysis from 1993 for Staples, Inc.

Director Compensation
---------------------
The Company pays no remuneration to its employees or to executives of 
Investcorp or any of its wholly-owned subsidiaries for serving as directors. 
See "Management--Executive Compensation." There are no family relationships 
among any of the directors or executive officers.


Item 11. Executive Compensation
-------------------------------

The following table sets forth certain information concerning the 
compensation of the Company's Chief Executive Officer and the four other 
most highly compensated executive officers for fiscal years 1997, 1996 and 
1995.

                         Summary Compensation Table

<TABLE>
<CAPTION>

                                                                                        Long Term
                                                                                       Compensation
                                                                                     ----------------
                                    Annual Compensation                                   Awards
                            ------------------------------------                     Number of Shares
        Name and                                                    Other Annual        Underlying          All Other
   Principal Position       Year(1)   Salary(2)($)   Bonus(2)($)   Compensation($)   Options/SARs(#)    Compensation(3)($)
-------------------------   -------   ------------   -----------   ---------------   ----------------   ------------------

<S>                          <C>        <C>            <C>                <C>             <C>                 <C>
Henry J. Nasella             1997       320,833        148,129            0                   0                8,319
Chairman, President and      1996       300,000              0            0                   0               12,046
Chief Executive Officer      1995       300,000        100,000            0                   0               13,140

Robert R. Spellman           1997       262,500        105,000            0                   0                7,693
Executive Vice President,    1996       250,000         50,000            0                   0                9,334
Administration and Chief     1995       250,000         50,000            0                   0                9,368
Financial Officer

Edward Albertian             1997       220,833         88,333            0                   0                6,375
Executive Vice President,    1996       197,583         63,238            0                 500                7,998
Operations and Chief         1995       131,396         26,279            0               4,114                5,868
Operating Officer

Carole O'Connor Gates        1997       182,500         73,000            0                   0                5,767
Executive Vice President,    1996       168,333         51,667            0                   0                7,495
Marketing                    1995       160,000         32,000            0               5,477                1,181

Stephen R. Winslow           1997       168,334         58,917            0                   0                1,004
Senior Vice President,       1996        46,667         56,000            0               1,500                  118
Finance

<FN>
--------------------
<F1>  Dates on which employment commenced were May 15, 1995 for Mr. 
      Albertian and October 15, 1996 for Mr. Winslow.

<F2>  Represents amounts paid for the relevant fiscal year. Bonuses are 
      reported in the fiscal year earned and typically paid during the 
      following fiscal year.

<F3>  The compensation reported represents: amounts contributed by the 
      Company under the 401(K) Savings Plan and imputed income on the value 
      of Company provided term life insurance in excess of $50,000.

      --   Company contributions under the 401(K) Savings Plan for fiscal 
           1995 were as follows: $6,332 for Mr. Nasella, $6,932 for Mr. 
           Spellman, $5,095 for Mr. Albertian, $613 for Ms. O'Connor Gates. 
           Imputed income on the value of Company provided term life insurance
           in excess of $50,000 in fiscal 1995 was as follows: $6,808 for 
           Mr. Nasella, $2,436 for Mr. Spellman, $773 for Mr. Albertian, $568 
           for Ms. O'Connor Gates.

      --   Company contributions under the 401(K) Savings Plan for fiscal 1996
           were as follows: $5,458 for Mr. Nasella, $6,898 for Mr. Spellman, 
           $6,898 for Mr. Albertian, $6,898 for Ms. O'Connor Gates and $0 for 
           Mr. Winslow.  Imputed income on the value of Company provided term 
           life insurance in excess of $50,000 in fiscal 1996 was as follows: 
           $6,588 for Mr. Nasella, $2,436 for Mr. Spellman, $1,100 for Mr. 
           Albertian, $597 for Ms. O'Connor Gates, and $118  for Mr. Winslow.

      --   Company contributions under the 401(K) Savings Plan for fiscal 1997
           were as follows: $ 5,100 for Mr. Nasella, $5,100 for Mr. Spellman, 
           $5,100 for Mr. Albertian, $5,100 for Ms. O'Connor Gates and $397 
           for Mr. Winslow. Imputed income on the value of Company provided 
           term life insurance in excess of $50,000 in fiscal 1997 was as 
           follows: $3,219 for Mr. Nasella, $2,593 for Mr. Spellman, $1,275 
           for Mr. Albertian, $667 for Ms. O'Connor Gates, and $607 for 
           Mr. Winslow.
</FN>
</TABLE>


Option Grants

The Company had no grants of stock options in respect of Class C Stock of 
Star Markets Holdings, Inc. ("Holdings") during the fiscal year ended 
January 31, 1998 to the executive officers named in the Summary Compensation 
Table.

Option Exercises and Holdings

The following table sets forth certain information related to stock options 
in respect of Class C Stock of Holdings for the fiscal year ended January 
31, 1998 for each of the executive officers named in the Summary 
Compensation Table; and the number and value of options held by each of 
these executives on January 31, 1998.

<TABLE>
<CAPTION>

                          Number of                     Number of Shares of 
                           Shares                      Common Stock Underlying          Value of Unexercised
                           Common                      Unexercised Options at          In-The-Money Options at
                            Stock                         Fiscal Year End                Fiscal Year End(1)
                         Acquired on     Value      ----------------------------    ----------------------------
        Name               Exercise     Realized    Exercisable    Unexercisable    Exercisable    Unexercisable
---------------------    -----------    --------    -----------    -------------    -----------    -------------

<S>                           <C>          <C>        <C>             <C>           <C>                 <C>
Henry J. Nasella              0            $0         45,744          30,495        $1,429,500          $0
Robert R. Spellman            0             0          1,617           6,466                 0           0
Edward Albertian              0             0            823           3,791                 0           0
Carole O'Connor Gates         0             0          1,095           4,382                 0           0
Stephen R. Winslow            0             0              0           1,500                 0           0

<FN>
--------------------
<F1>  Underlying shares are not publicly traded and are subject to 
      repurchase by Holdings under certain circumstances at the employee's 
      cost or at the then current value of the underlying share, as 
      determined by the Holding's Board of Directors upon the termination of 
      the employee's employment with the Company. Only those options granted 
      to Mr. Nasella at an exercise price of $37.50 per share are classified 
      as in-the-money for purposes of this table based on an estimated value 
      of such shares of $75.00 per share. Neither Holdings nor the Company 
      has established any recent valuations for such shares.
</FN>
</TABLE>


Item 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

All of the Company's issued and outstanding capital stock is owned by 
Holdings. Class D Stock, par value $.01 per share, is the only class of 
Holdings' stock that currently possesses voting rights. At January 31, 1998 
there were 5,000 shares of Holdings' Class D Stock issued and outstanding. 
Members of the Company's management own 37,636 shares, and have the right to 
acquire an additional 57,269 shares subject to presently exercisable 
options, of Holdings' Class C Stock, par value $.01 per share, which stock 
has no voting rights except in certain limited circumstances. The following 
tables set forth the beneficial ownership of each class of issued and 
outstanding securities of Holdings by each director of the Company, each of 
the executive officers of the Company listed under "Management," the 
directors and executive officers of the Company as a group and each person 
who beneficially owns more than 5% of the outstanding shares of any class of 
voting securities of Holdings.

Class D Voting Stock:
---------------------

<TABLE>
<CAPTION>

                                         Number of       Voting 
                                         Shares(1)    Percentage(1)
                                         ---------    -------------

<S>                                        <C>           <C>
INVESTCORP S.A.(2)(6)                      5,000         100.0%
37 rue Notre-Dame,
Luxembourg

SIPCO Limited(3)                           5,000         100.0%
P.O. Box 1111
West Wind Building
George Town, Grand Cayman
Cayman Islands

CIP Limited(4)(5)                          4,600          92.0%
P.O. Box 1111
West Wind Building
George Town, Grand Cayman
Cayman Islands

Ballet Limited(4)(5)                         460           9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands

Denary Limited(4)(5)                         460           9.2%
West Wind Building
George Town, Grand Cayman
Cayman Islands

Gleam Limited(4)(5)                          460           9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands

Highlands Limited(4)(5)                      460           9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands

Noble Limited(4)(5)                          460           9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands

Outrigger Limited(4)(5)                      460           9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands

Quill Limited(4)(5)                          460           9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands

Radial Limited(4)(5)                         460           9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands

Shoreline Limited(4)(5)                      460           9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands

Zinnia Limited(4)(5)                         460           9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands

INVESTCORP Investment Equity Limited(6)      400           8.0%
P.O. Box 1111
West Wind Building 
George Town, Grand Cayman
Cayman Islands

<FN>
--------------------
<F1>  As used in this table, beneficial ownership means the sole or shared 
      power to vote, or to direct the voting of a security, or the sole or 
      shared power to dispose, or direct the disposition of, a security.

<F2>  Investcorp does not directly own any stock in Holdings. The number of 
      shares shown as owned by Investcorp includes all of the shares owned 
      by INVESTCORP Investment Equity Limited (see (6) below). Investcorp 
      owns no stock in Ballet Limited, Denary Limited, Gleam Limited, 
      Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, 
      Radial Limited, Shoreline Limited, Zinnia Limited, or in the 
      beneficial owners of these entities. Investcorp may be deemed to share 
      beneficial ownership of the shares of voting stock held by these 
      entities because the entities have entered into revocable management 
      services or similar arrangements with an affiliate of Investcorp 
      pursuant to which each of such entities has granted such affiliate the 
      authority to direct the voting and disposition of the Holdings voting 
      stock owned by such entity for so long as such agreement is in effect. 
      Investcorp is a Luxembourg corporation.

<F3>  SIPCO Limited may be deemed to control Investcorp through its 
      ownership of a majority of a company's stock that indirectly owns a 
      majority of Investcorp's shares.

<F4>  CIP Limited ("CIP") owns no stock in Holdings. CIP owns less than 0.1% 
      of the stock in each of Ballet Limited, Denary Limited, Gleam Limited, 
      Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, 
      Radial Limited, Shoreline Limited and Zinnia Limited (see (5) below). 
      CIP may be deemed to share beneficial ownership of the shares of 
      voting stock of Holdings held by such entities because CIP acts as a 
      director of such entities and the ultimate beneficial shareholders of 
      each of those entities have granted CIP revocable proxies in companies 
      that own those entities' stock. None of the ultimate beneficial owners 
      of such entities beneficially owns individually more than 5% of 
      Holdings' voting stock.

<F5>  CIP, Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited, 
      Noble Limited, Outrigger Limited, Quill Limited, Radial Limited, 
      Shoreline Limited and Zinnia Limited each is a Cayman Islands 
      corporation.

<F6>  INVESTCORP Investment Equity Limited is a Cayman Islands corporation, 
      and a wholly-owned subsidiary of Investcorp.
</TABLE>


Class C Non-Voting Stock:
-------------------------

<TABLE>
<CAPTION>
                                                   Number of
                                                   Shares(1)
                                                   ---------

<S>                                                <C>
Henry J. Nasella                                   72,411(2)
625 Mount Auburn Street
Cambridge, MA  02138

Robert R. Spellman                                  4,950(3)
625 Mount Auburn Street
Cambridge, MA  02138

Edward Albertian                                    1,423(4)
625 Mount Auburn Street
Cambridge, MA  02138

Carole O'Connor Gates                               1,735(5)
625 Mount Auburn Street
Cambridge, MA  02138

Stephen R. Winslow                                    600
625 Mount Auburn Street
Cambridge, MA  02138

All directors and executive officers of
 the Company as a group (5) persons                81,119

<FN>
--------------------
<F1>  As used in this table, beneficial ownership means the sole or shared 
      power to vote, or direct the voting of a security, or the sole or 
      shared power to dispose, or direct the disposition of, a security. 
      Each of the persons listed is deemed to beneficially own shares 
      issuable upon the exercise of stock options that are currently 
      exercisable ("Presently Exercisable Options").

<F2>  Includes 45,744 shares subject to Presently Exercisable Options.

<F3>  Includes 1,617 shares subject to Presently Exercisable Options.

<F4>  Includes 823 shares subject to Presently Exercisable Options.

<F5>  Includes 1,095 shares subject to Presently Exercisable Options.
</FN>
</TABLE>

Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------

In connection with the Acquisition, the Company entered into an agreement 
for management advisory and consulting services (the "Management Agreement") 
with International pursuant to which the Company agreed to pay International 
$750,000 per annum for a five-year term. At the closing of the Acquisition, 
the Company paid International approximately $2.3 million for the first 
three years in accordance with the terms of the Management Agreement, with 
the remaining two years due in quarterly installments.


                                   PART IV


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

(a)  1.   The financial statements listed in the List of Financial 
          Statements on page F-2 are filed as part of this Annual Report 
          on Form 10-K.

(a)  2.   Financial Statement Schedules
          All schedules are omitted as the required information is 
          inapplicable or are presented in the financial statements or 
          related notes.

(a)  3.   List of Exhibits:

Each management contract or compensatory plan or arrangement required to be 
filed as an exhibit to this Form 10-K is identified with an asterisk ("*") 
below.

Exhibit 
Number     Description of Exhibits
-------    ----------------------

  3(a)     Amended and Restated Articles of Organization of the Company, dated 
           as of September 6, 1994 (filed as Exhibit 3(a) to the Registration 
           Statement (No. 33-86690) on Form S-4 (the "Registration Statement") 
           and incorporated herein by reference).

  3(b)     By-laws of the Company (filed as Exhibit 3(b) to the Registration 
           Statement and incorporated herein by reference).

  3(c)     Certificate of Designation relating to the Preferred Stock of the 
           Company, dated September 7, 1994 (filed as Exhibit 3(c) to the 
           Registration Statement and incorporated herein by reference).

  4(a)     Indenture between the Company and State Street Bank and Trust 
           Company, as Trustee, dated as of November 1, 1994 (filed as Exhibit 
           4(a) to the Registration Statement and incorporated herein by 
           reference).

  4(b)     Exchange and Registration Rights Agreement among the Company, 
           Chemical Securities Inc. and BT Securities Corporation, dated 
           November 2, 1994 (filed as Exhibit 4(b) to the Registration 
           Statement and incorporated herein by reference).

 10(a)    Asset Purchase Agreement between Jewel Food Stores, Inc. and Star 
          Acquisition Corp., dated July 28, 1994 (filed as Exhibit 10(a) to 
          the Registration Statement and incorporated herein by reference).

 10(b)    First Amendment to Asset Purchase Agreement between Jewel Food 
          Stores, Inc. and Star Acquisition Corp., dated August 3, 1994 
          (filed as Exhibit 10(b) to the Registration Statement and 
          incorporated herein by reference).

 10(c)    Second Amendment to Asset Purchase Agreement between Jewel Food 
          Stores, Inc. and the Company, dated September 8, 1994 (filed as 
          Exhibit 10(c) to the Registration Statement and incorporated herein 
          by reference).

 10(d)    Purchase Agreement among the Company, Chemical Securities Inc. and 
          BT Securities Corporation, dated October 26, 1994 (filed as Exhibit 
          10(d) to the Registration Statement and incorporated herein by 
          reference).

 10(e)    Credit Agreement among the Company, Chemical Bank, as 
          Administrative Agent, and the lenders party thereto, dated as of 
          September 8, 1994 (filed as Exhibit 10(e) to the Registration 
          Statement and incorporated herein by reference).

 10(f)    Security Agreement made by the Company in favor of Chemical Bank, 
          as Administrative Agent, dated as of September 8, 1994 (filed as 
          Exhibit 10(f) to the Registration Statement and incorporated herein 
          by reference).

 10(g)    Transition Services Agreement between Jewel Food Stores, Inc. and 
          the Company, dated as of September 8, 1994 (filed as Exhibit 10(g) 
          to the Registration Statement and incorporated herein by 
          reference).

 10(h)    Interim Limited Management Agreement between the Company and Star 
          Market Liquors, Inc., dated as of September 8, 1994 (filed as 
          Exhibit 10(h) to the Registration Statement and incorporated herein 
          by reference).

 10(i)    Agreement for Management Advisory and Consulting Services between 
          Investcorp International, Inc. and the Company, dated as of 
          September 8, 1994 (filed as Exhibit 10(i) to the Registration 
          Statement and incorporated herein by reference).

 10(j)*   Employment Agreement between the Company and Henry Nasella, dated 
          as of September 8, 1994 (filed as Exhibit 10(j) to the Registration 
          Statement and incorporated herein by reference).

 10(k)    Trust Agreement between the Company and Fidelity Management Trust 
          Company, dated as of September 8, 1994 (filed as Exhibit 10(m) to 
          the Registration Statement and incorporated herein by reference).

 10(l)    Third Amendment to Asset Purchase Agreement between Jewel Food 
          Stores, Inc. and Star Acquisition Corp., dated January 13, 1995 
          (filed as Exhibit 10(n) to the Registration Statement and 
          incorporated herein by reference).

 10(m)*   Star Markets Retirement Estates plan description dated November 7, 
          1994 (filed as Exhibit 10(o) to the Registration Statement and 
          incorporated herein by reference).

 10(n)*   1994 Stock Incentive Plan of Holdings, dated September 8, 1994 
          (filed as Exhibit 10(p) to the Registration Statement and 
          incorporated herein by reference).

 10(o)    First Amendment to Credit Agreement among the Company, Chemical 
          Bank, as Administrative Agent, and the lenders party thereto, dated 
          as of January 16, 1996 (filed as Exhibit 10(q) to the Company's 
          1995 Form 10-K and incorporated herein by reference).

 10(p)*   Second Amendment to Credit Agreement among the Company, Chemical 
          Bank, as Administrative Agent, and the lenders party thereto, dated 
          as of June 25, 1996 (filed as Exhibit 10(p) to the company's 1996 
          Form 10-k and incorporated herein by reference).

 10(q)*   Third Amendment to Credit Agreement among the Company, Chemical 
          Bank, as Administrative Agent, and the lenders party thereto, dated 
          as of April 21, 1997 (filed as Exhibit 10(q) to the company's 1996 
          Form 10-k and incorporated herein by reference).

 27**     Financial Data Schedule for the 52 weeks ended January 31, 1998.


(b)       No reports were filed on Form 8-K for the 13-week period ended 
          January 31, 1998 .


**   As filed herewith.


                                 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.


                                       Star Markets Company, Inc.

DATE:  May 1, 1998                     BY:  /s/ Henry J. Nasella
                                       ---------------------------------------
                                       Henry J. Nasella
                                       Chairman of the Board of Directors
                                       President and Chief Executive Officer


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

<TABLE>
<CAPTION>

        Signature                            Title                        Date
-------------------------    -------------------------------------    ------------

<S>                          <C>                                       <C>
/s/ Henry J. Nasella
-------------------------
    Henry J. Nasella         Chairman of the Board of Directors        May 1, 1998
                             President and Chief Executive Officer
                             (Principal Executive Officer)


<CAPTION>

        Signature                            Title                        Date
-------------------------    -------------------------------------    ------------


<S>                          <C>                                      <C>
/s/ Robert R. Spellman
-------------------------
    Robert R. Spellman       Director                                 May 1, 1998
                             Executive Vice President, Administration
                             Chief Financial Officer
                             (Principal Financial and Accounting Officer)
</TABLE>



SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO 
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES 
PURSUANT TO SECTION 12 OF THE ACT.

Not Applicable. No Annual Report or proxy material has been sent to holders 
of the Registrant's securities.


                         Annual Report on Form 10-K
                         Item 8, Item 14 (a) 1.
                        List of Financial Statements
                            Financial Statements
                                   Exhibit
                       52 weeks ended January 31, 1998
                       52 weeks ended February 1, 1997,
                       53 weeks ended February 3, 1996

                         Star Markets Company, Inc.
                                Cambridge, MA

                         Form 10-K - Item 14 (a) 1.



                         Star Markets Company, Inc.

                       52 weeks ended January 31, 1998
                       52 weeks ended February 1, 1997,
                       53 weeks ended February 3, 1996


List of Financial Statements

The following financial statements of Star Markets Company, Inc. ("The 
Company") are included herein:

      Balance sheets - January 31, 1998 and February 1, 1997 

      Statements of operations - 52 weeks ended January 31, 1998, 52 weeks 
      ended February 1, 1997 and 53 weeks ended February 3, 1996

      Statements of equity - 52 weeks ended January 31,1998, 52 weeks ended 
      February 1, 1997 and 53 weeks ended February 3, 1996

      Statements of cash flows - 52 weeks ended January 31, 1998, 52 weeks 
      ended February 1, 1997 and 53 weeks ended February 3, 1996 

      Notes to financial statements - January 31, 1998.



              Report of Ernst & Young LLP, Independent Auditors


Shareholder and Board of Directors 
Star Markets Company, Inc.

We have audited the accompanying balance sheets of Star Markets Company, 
Inc. ("The Company") as of January 31, 1998 and February 1, 1997 and the 
related statements of operations, equity, and cash flows for each of the 
three years in the period ended 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 financial statements referred to above present fairly, 
in all material respects, the financial position of Star Markets Company, 
Inc. at January 31, 1998 and February 1, 1997 and the results of its 
operations and its cash flows for each of the three years in the period 
ended January 31, 1998 in conformity with generally accepted accounting 
principles.

                                       Ernst & Young LLP

Boston, Massachusetts
March 20, 1998



                          Star Markets Company, Inc.

                               Balance Sheets

                  (Amounts in thousands, except share data)


<TABLE>
<CAPTION>

                                                            January 31,    February 1,
                                                               1998           1997
                                                            -----------    -----------

<S>                                                          <C>            <C>
Assets
Current assets:
  Accounts receivable, net of reserve for doubtful 
   accounts of $1,391 in 1997 and $1,589 in 1996             $  21,001      $  21,815
  Inventory                                                     71,524         65,550
  Prepaid expenses                                               4,465          4,959
                                                             ------------------------
Total current assets                                            96,990         92,324

Property and equipment at cost:
  Land                                                          21,287         31,015
  Building                                                      51,452         66,603
  Equipment & fixtures                                         112,010         88,623
  Leasehold improvements                                        61,644         44,024
                                                             ------------------------
Total property & equipment                                     246,393        230,265
  Less accumulated depreciation and amortization                52,692         35,569
                                                             ------------------------
Net property and equipment                                     193,701        194,696

Other assets, net                                               31,287         33,058
Goodwill, net                                                  130,564        133,192
                                                             ------------------------
Total Assets                                                 $ 452,542      $ 453,270
                                                             ========================

Liabilities and Shareholder's Equity
Current liabilities:
  Accounts payable                                           $  46,091      $  46,798
  Accrued payroll & benefits                                    13,195         12,842
  Current portion self-insurance                                 8,266          8,121
  Accrued interest                                               6,092          6,003
  Other current liabilities                                     16,503         13,637
                                                             ------------------------
Total current liabilities                                       90,147         87,401

Self-insurance reserves, less current portion                   18,523         18,960
Other liabilities                                                5,687          3,772
Long-term debt                                                 276,327        271,827

Redeemable preferred stock, redemption value $11,000            10,326         10,230

Shareholder's equity:
  Common stock, $.01 par value, 10,000 shares authorized
   and 5,000 shares outstanding                                      0              0
  Additional paid-in-capital                                    83,924         84,907
  Retained earnings (deficit)                                  (32,392)       (23,827)
                                                             ------------------------
Total shareholder's equity                                      51,532         61,080
                                                             ------------------------
Total Liabilities and Shareholder's Equity                   $ 452,542      $ 453,270
                                                             ========================
</TABLE>


See accompanying notes.


                         Star Markets Company, Inc.

                          Statements of Operations

                           (Amounts in thousands)


<TABLE>
<CAPTION>

                                               52 Weeks Ended      52 Weeks Ended      53 Weeks Ended 
                                              January 31, 1998    February 1, 1997    February 3, 1996
                                              ----------------    ----------------    ----------------

<S>                                             <C>                  <C>                 <C>
Total revenues                                  $ 1,034,188          $ 954,531           $ 854,504
Cost of goods sold                                  761,798            715,090             656,813
                                                --------------------------------------------------

Gross profit                                        272,390            239,441             197,691

Operating and administrative expenses               226,708            197,314             158,723
Depreciation and amortization                        23,792             22,178              19,326
                                                --------------------------------------------------

                                                     21,890             19,949              19,642

Interest expense                                     30,177             28,894              28,382
Other income (expenses), net                             87                (13)                100
                                                --------------------------------------------------

Loss before income taxes                             (8,200)            (8,958)             (8,640)

Income taxes                                            365                378                 250
                                                --------------------------------------------------

Net loss                                        $    (8,565)         $  (9,336)          $  (8,890)
                                                ==================================================
</TABLE>


See accompanying notes.


                         Star Markets Company, Inc.

                            Statements of Equity

                           (Amounts in thousands)



<TABLE>
<CAPTION>

                                                 Common      Additional        Retained
                                                 Stock     Paid-In-Capital     Earnings      Total
                                                 ------    ---------------    ----------    --------

<S>                                               <C>         <C>             <C>           <C>
Balance at January 28, 1995                       $  0        $ 74,480        $  (5,601)    $ 68,879
  Net loss                                                                       (8,890)      (8,890)
  Accretion of preferred stock                                     (97)                          (97)
  Preferred stock dividend                                      (1,248)                       (1,248)
  Deferred compensation                                            557                           557
                                                  --------------------------------------------------
Balance at February 3, 1996                          0          73,692          (14,491)      59,201
  Net loss                                                                       (9,336)      (9,336)
  Accretion of preferred stock                                     (96)                          (96)
  Preferred stock dividend                                      (1,230)                       (1,230)
  Deferred compensation                                            556                           556
  Equity contribution, net of issuance costs                    11,985                        11,985
                                                  --------------------------------------------------
Balance at February 1, 1997                          0          84,907          (23,827)      61,080
  Net loss                                                                       (8,565)      (8,565)
  Accretion of preferred stock                                     (97)                          (97)
  Preferred stock dividend                                      (1,226)                       (1,226)
  Deferred compensation                                            340                           340
                                                  --------------------------------------------------
Balance at January 31, 1998                       $  0        $ 83,924        $ (32,392)    $ 51,532
                                                  ==================================================
</TABLE>


                         Star Markets Company, Inc.

                          Statements of Cash Flows

                           (Amounts in thousands)

<TABLE>
<CAPTION>

                                                      52 Weeks Ended      52 Weeks Ended      53 Weeks Ended
                                                     January 31, 1998    February 1, 1997    February 3, 1996
                                                     ----------------    ----------------    ----------------

<S>                                                     <C>                 <C>                 <C>
Operating activities
Net loss                                                $  (8,565)          $  (9,336)          $  (8,890)
Adjustments to reconcile net loss to net cash 
 provided by operating activities:
  Amortization of deferred financing costs                  1,648               1,543               1,564
  Depreciation and amortization                            23,792              22,178              19,326
  Loss (gain) on sale or disposal of property 
   and equipment                                              (87)                 15                 (93)
  Changes in operating assets and liabilities:
    Accounts receivable                                       814              (8,271)              2,008
    Inventories                                            (5,974)             (2,636)             (3,529)
    Prepaid expenses                                          494                  85              (1,888)
    Accounts payable                                         (707)              7,028               1,139
    Accrued payroll and benefits                              353                 333               1,686
    Self-insurance reserves                                  (291)               (571)             (2,445)
    Accrued interest                                           89                 870               1,231
    Other current liabilities                               3,491               2,754              (1,604)
    Other                                                   1,267                 524              (4,263)
                                                        -------------------------------------------------
Net cash provided by operating activities                  16,324              14,516               4,242

Investing activities
Purchases of property and equipment                       (41,058)            (34,762)            (60,710)
Proceeds from sale of property and equipment               22,381               4,365              56,296
Decrease (increase) in restricted cash                                          6,028              (6,028)
Purchase of Cape Ann Market, Inc.                                                                  (5,293)
Acquisition of leasehold interests                                            (20,064)
                                                        -------------------------------------------------
Net cash used in investing activities                     (18,677)            (44,433)            (15,735)

Financing Activities
Net proceeds from revolving credit facility                 4,600              12,400              18,400
Proceeds from long-term debt                                                    4,087
Repayment of long-term debt                                  (722)             (1,340)             (1,000)
Preferred dividends paid                                   (1,226)             (1,230)             (1,226)
Deposits refunded (made)                                      500               4,000              (4,500)
Equity contribution                                                            12,000
Deferred financing costs                                     (799)                                   (181)
                                                        -------------------------------------------------
Net cash provided by financing activities                   2,353              29,917              11,493

Net increase in cash and cash equivalents                       0                   0                   0
Cash and cash equivalents beginning of period                   0                   0                   0
                                                        -------------------------------------------------
Cash and cash equivalents end of period                 $       0           $       0           $       0
                                                        =================================================

Supplemental disclosure of cash flow information:
  Cash paid for interest                                $  28,440           $  26,374        $   25,382
  Cash paid for taxes                                         365                 370        359
</TABLE>


See accompanying notes.


                         Star Markets Company, Inc.

                        Notes to Financial Statements

                              January 31, 1998


1. Background
Star Markets Company, Inc., a Massachusetts corporation (the "Company"), is 
a leading food retailer in the metropolitan Boston area and operated 52 
stores as of January 31, 1998. Additionally, the Company operates a 
wholesale business which provides warehousing, distribution and certain 
administrative services to independent store locations throughout the New 
England area.

The Company is a wholly-owned subsidiary of Star Markets Holdings, Inc., a 
Massachusetts corporation ("Holdings"). Both Holdings and the Company were 
formed for purposes of the acquisition described below.


2. Acquisitions
Star Market Company ("Predecessor") was operated as a division of Jewel Food 
Stores, Inc. ("Jewel"), a wholly-owned subsidiary of American Stores Company 
(the "Parent" or "ASC"). On September 8, 1994, the Company acquired all of 
the business and assets of Predecessor from Jewel and other affiliates of 
ASC (the "Acquisition").

For financial statement purposes, the Acquisition was accounted for as a 
purchase effective September 10, 1994. The assets and business were acquired 
for an aggregate purchase price of $293.3 million, exclusive of related fees 
and expenses.

The purchase price, including approximately $11.0 million in related fees 
and expenses, has been allocated based upon the fair value of the Company's 
assets and liabilities as follows (in millions):


<TABLE>

      <S>                                            <C>
      Historical basis of net assets acquired        $126.4
      Fair value and other adjustments:
        Property, plant and equipment                  40.9
        Inventory                                       5.6
        Accounts receivable                            (1.1)
        Liabilities                                    (5.1)
                                                     ------
      Fair market value of net assets                 166.7
      Goodwill                                        137.6
                                                     ------
      Total purchase price                           $304.3
                                                     ======
</TABLE>

During 1995, the Company adjusted the amount of goodwill initially recorded 
by approximately $3.0 million as a result of the resolution of contingencies 
identified as part of the original purchase price allocation.

In May 1995, the Company purchased the operations, which consisted of three 
conventional supermarkets, and certain assets of Cape Ann Market, Inc. for 
an aggregate purchase price of $5.0 million, exclusive of related fees and 
expenses.


3. Significant Accounting Policies

Reclassification 
Certain amounts in the historical financial statements of the Company have 
been reclassified to conform with the Company's current method of 
presentation.

Fiscal Year
The fiscal year of the Company ends on the Saturday nearest to January 31. 
All references herein to "1997", "1996" and "1995", mean the 52-week fiscal 
year ended January 31, 1998, the 52-week fiscal year ended February 1, 1997 
and the 53-week fiscal year ended February 3, 1996, respectively. The effect 
of the additional week on 1995 results of operations was not material.

Inventories
Inventories are stated at the lower of cost, using the FIFO (first-in, 
first-out) and weighted average cost methods, or market.

Goodwill
Goodwill represents the excess of the cost of the purchased businesses over 
the fair value of the net underlying assets and is being amortized using the 
straight-line method over 40 years. Accumulated amortization at January 31, 
1998 and February 1, 1997 was $11.8 million and $8.3 million, respectively. 
At each balance sheet date, management assesses whether there has been a 
permanent impairment in the value of goodwill by comparing anticipated 
undiscounted future cash flows from operating activities with the carrying 
value of the goodwill. The amount of any resulting impairment is calculated 
using the same undiscounted cash flows from operating activities. The 
factors considered by management in this assessment include operating 
results, trends and prospects, as well as the effects of demand, competition 
and other economic factors.

Use of Estimates
The preparation of financial statements in conformity with generally 
accepted accounting principles requires management of the Company to make 
estimates and assumptions that affect the amounts reported in the financial 
statements and accompanying notes. Actual results could differ from those 
estimates.

Deferred Financing Costs
Deferred financing costs, included in other assets, are amortized over the 
term of the related financing. Amortization of deferred financing costs is 
included in interest expense in the Statement of Operations. Accumulated 
amortization at January 31, 1998 and February 1, 1997 was $5.3 million and 
$3.6 million, respectively.

Depreciation and Amortization
Depreciation and amortization is provided on a straight-line basis over the 
estimated useful lives of owned assets. Leasehold improvements are amortized 
over the estimated useful life of the property or over the term of the 
lease, whichever is shorter. Depreciation begins when the asset is placed in 
service.

Costs of Opening and Closing Stores
The costs of opening new stores are charged against operations as incurred. 
When a store is closed, the remaining investment, net of salvage value, is 
charged against operations and, for leased stores, a provision is made for 
the remaining lease liability, net of expected sublease income.

Recently Issued Accounting Pronouncements
During 1997, the Financial Accounting Standards Board issued Statement No. 
130, "Reporting Comprehensive Income" ("Statement 130").  The Company will 
adopt the provisions of Statement 130 during Fiscal 1998.  Comprehensive 
income is generally defined as all changes in stockholder's equity exclusive 
of transactions with owners such as capital investments and dividends.

In June 1997, the Financial Accounting Standards Board issued Statement No. 
131, "Disclosures About Segments of an Enterprise and Related Information" 
("Statement 131"), which is required to be adopted for years beginning after 
December 15, 1997.  Management of the Company does not expect the adoption 
of Statement 131 to have a material impact on the Company's financial 
statement disclosures.

Advertising Expense
Total advertising expense amounted to $11.8 million, $10.5 million and $9.8 
million in 1997, 1996 and 1995, respectively. The Company expenses all 
advertising costs as incurred.


4. Financial Instruments

The following methods and assumptions were used by the Company to estimate 
the fair value of its financial instruments:

Receivables, and accounts payable and other current liabilities: the 
carrying amounts reported in the balance sheet approximate fair value. Long-
term debt:  the fair value of the Company's 13% Senior Subordinated Notes is 
based on quoted market prices; the fair value of other long-term debt 
approximates carrying amounts.

The carrying amounts and fair values of the Company's financial instruments 
are as follows (in thousands):

<TABLE>
<CAPTION>
                           January 31, 1998        February 1, 1997
                         --------------------    --------------------
                         Carrying      Fair      Carrying      Fair
                          Amount      Value       Amount      Value
                         --------    --------    --------    --------

      <S>                <C>         <C>         <C>         <C>
      Long-term debt     $277,427    $291,727    $273,548    $287,298
</TABLE>


5. Long-term Debt

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

<TABLE>
<CAPTION>
                                       January 31, 1998    February 1, 1997
                                       ----------------    ----------------

<S>                                       <C>                 <C>
Senior Credit Facility:
  Term Loan: Tranche A                    $       0           $  38,500
             Tranche B                       39,750              39,750
             Tranche C                       29,750              29,750
             Additional Tranche C            38,500                   0
  Revolving credit facility                  56,400              51,800
                                          -----------------------------
Total Senior Credit Facility                164,400             159,800
13% Senior subordinated notes               110,000             110,000
8% Note Payable                               3,027               3,748
                                          -----------------------------
Total                                       277,427             273,548
Less current maturities                       1,100               1,721
                                          -----------------------------
                                          $ 276,327           $ 271,827
                                          =============================
</TABLE>

The following table presents the maturities of the long-term debt for the 
next five fiscal years and thereafter (in thousands) as of January 31, 1998:

<TABLE>

      <S>                               <C>
      Fiscal  1998                          1,100
              1999                          1,163
              2000                         11,077
              2001                         86,803
              2002 and thereafter         177,284
                                        ---------
              Total                     $ 277,427
                                        =========
</TABLE>

Senior Credit Facility
The Senior Credit Facility provides for a total of $183.0 million of term 
and revolving loan credit (the "loans"). In order to accommodate continued 
investment in new store growth, the terms of the Senior Credit Facility were 
amended on April 21, 1997. This amendment, dated April 21, 1997, provides 
for a $108.0 million term loan facility and a $75.0 million revolving credit 
facility, extends certain term loans, extends the revolving credit facility 
by two years to December 31, 2001, and amends certain financial covenants.

The availability under the revolving credit facility may be utilized to meet 
the Company's current working capital requirements, including issuance of 
letters of credit. The Company can also utilize the remaining availability 
to fund capital expenditures. The revolving credit facility expires on 
December 31, 2001. At January 31, 1998, the Company had outstanding letters 
of credit totaling $7.2 million as required by certain contracts relating to 
inventory and self-insurance, which reduced the amount available under the 
revolving credit facility.

The loans require that under certain circumstances, proceeds from the 
issuance of certain debt or equity or specified asset sales, exchanges or 
excess cash flow are required to prepay indebtedness under the loan 
facility. The terms of the Senior Credit Facility have been amended to allow 
for certain proceeds from the sale of assets to be used to partially fund 
acquired store locations.

The loans are secured by a first priority security interest in substantially 
all the assets of the Company and a pledge of all the issued and outstanding 
stock of the Company. In addition, the loans are guaranteed by Holdings.

Borrowings under the loans accrue interest at a floating interest rate, 
which at the option of the Company is either (a) the greater of (i) the 
bank's announced reference rate, (ii) a rate which fluctuates with the 
secondary market rate for certificates of deposits, plus 1% or (iii) the 
federal funds rate, plus .5%, in each case plus a margin varying from 1.25% 
to 2.25% depending on the type and maturity of the loan, or (b) LIBOR, plus 
a margin varying from 2.50% to 3.50% depending on the type and maturity of 
the loan.

At January 31, 1998, the interest rates on the term loan facility ranged 
from 8.82% to 9.32% and the weighted average interest rate on amounts 
outstanding under the revolving credit facility at January 31, 1998 and 
February 1, 1997 were 8.40% and 8.11%, respectively.

13% Senior Subordinated Notes
On November 2, 1994, the Company issued $110 million of Senior Subordinated 
Notes ("Notes"), due November 1, 2004. The Notes were offered and sold 
pursuant to Rule 144A under the Securities Act and net proceeds were used as 
follows:  (i) approximately $75.8 million was used to repay the outstanding 
indebtedness under the Company's Subordinated Loan Facility and all accrued 
and unpaid interest thereon, (ii) approximately $25.1 million was used to 
repay outstanding indebtedness under the term loan portion of the Company's 
Senior Credit Facility and all accrued and unpaid interest due thereon and 
(iii) the remaining proceeds were retained by the Company for general 
corporate purposes, including working capital.

8% Note Payable
The Company issued a $4.0 million note payable in connection with the store 
locations acquired in 1996. The note payable bears interest at 8.00% per 
annum and requires quarterly payments of principal and interest through July 
2001.

Capitalized interest totaled $161,000, $55,000 and $1,839,000 for 1997, 1996 
and 1995, respectively.

6. Preferred Stock

The Company is authorized to issue 10,000 shares of preferred stock, par 
value $.01 per share. In connection with the 1994 Acquisition, the Company 
issued 5,000 preferred shares for $11.0 million, and concurrently paid an 
issuance fee of $1.0 million on behalf of Holdings. All of the outstanding 
preferred shares are held by Holdings.

Dividends on the preferred stock accrue at a rate of 11% per annum. 
Dividends are cumulative and are payable when declared by the Board of 
Directors of the Company, out of assets legally available therefore, on 
April 30 and October 31 of each year, commencing on October 31, 1994. The 
Company's Board of Directors declared, and the Company has paid, all 
required dividends on the Company's cumulative preferred stock through 
January 31, 1998. To the extent that dividends are accrued, but have not 
been declared and paid, such undeclared and unpaid dividends will accrue 
additional dividends from the date upon which such dividends accrued until 
the date upon which they are paid at the rate of 13% per annum.

The shares of preferred stock are redeemable at the option of the Company at 
a redemption price of $2,200 per share plus accrued and unpaid dividends 
thereon to the date fixed for redemption. On December 31, 2005, the Company 
is required to redeem all outstanding shares of preferred stock at $2,200 
per share plus accrued and unpaid dividends thereon to the date fixed for 
redemption.

7. Leases
The Company leases retail stores and equipment. The store leases have an 
average life of approximately 33 years until final expiration. The store 
leases generally have renewal options and provide for contingent rent based 
on sales levels in excess of specified levels.

The summary below shows the aggregate future minimum lease commitments at 
January 31, 1998. Operating leases are shown net of an aggregate $8.7 
million of minimum rental income under noncancelable subleases.

<TABLE>
<CAPTION>
                                               Operating
                                                 Leases
                                             --------------
                                             (In thousands)

   <S>                                         <C>
   1998                                        $  27,974
   1999                                           27,745
   2000                                           25,801
   2001                                           26,371
   2002                                           25,561
   Thereafter                                    329,171
                                               ---------
   Total minimum rent commitments              $ 462,623
                                               =========
</TABLE>

Rent expense for real property was as follows:

<TABLE>
<CAPTION>

               Minimum    Sublease               Contingent     Total
                Rent        Rent        Net         Rent        Rent
               -------    --------    -------    ----------    -------
                                   (In thousands)

<S>            <C>        <C>         <C>           <C>        <C>
1997           $22,284    $(1,298)    $20,986       $329       $21,315
1996           $16,639    $  (970)    $15,669       $338       $16,007
1995             9,876       (560)      9,316        431         9,747
</TABLE>

Additionally, rent expense for personal property totaled approximately $3.5 
million, $2.1 million and  $1.7 million, for 1997, 1996 and 1995,  
respectively.

Leasehold interests were acquired in connection with the 10 locations 
acquired during 1996 and represent the present value of the excess of market 
rents over actual rents payable over the remaining lives of the leases. The 
leasehold interests are being amortized on the straight-line method over the 
remaining lives of the leases. Accumulated amortization at January 31, 1998 
was $1.3 million.

8. Income Taxes

Federal and state income taxes charged to earnings are summarized below:

<TABLE>
<CAPTION>
                     1997     1996     1995
                     -----    -----    -----

<S>                  <C>      <C>      <C>
Current:            
  Federal            
  State              $ 365    $ 378    $ 250 
                     -----------------------
Income taxes         $ 365    $ 378    $ 250
                     ======================= 
</TABLE>

The effective income tax rate differs from the statutory federal income tax 
rate as follows:

<TABLE>
<CAPTION>
                                               1997       1996       1995
                                              -------    -------    -------

<S>                                           <C>        <C>        <C>
Statutory federal income tax rate             (34.0%)    (34.0%)    (34.0%)
State income taxes, net of federal income 
 tax effect                                     4.5        4.2        2.9
Unbenefitted Losses / Loss Carryforward        34.0       34.0       34.0
                                              ----------------------------
Effective income tax rate                       4.5%       4.2%       2.9%
                                              ============================
</TABLE>


Deferred tax assets and liabilities as of 1996 and 1995 related to the 
following temporary differences (in thousands):

<TABLE>
<CAPTION>
                                      January 31, 1998    February 1, 1997
                                      ----------------    ----------------

<S>                                      <C>                 <C>
Deferred tax liabilities:
  Goodwill                               $ (4,939)           $ (3,393)
  Basis in fixed assets                    (4,548)             (3,786)
  Other, net                               (1,327)             (1,489)
                                         ----------------------------
Total deferred tax liabilities            (10,814)             (8,668)
Deferred tax assets:            
  Self-insurance reserves                  10,605              14,522
  Net operating loss carryforward          20,435              13,816
  Compensation and benefits                 2,088               2,194
  Miscellaneous accruals                    1,032                 575
  Other, net                                2,239               1,777
                                         ----------------------------
Total deferred tax assets                  36,399              32,884
Valuation allowance                       (25,585)            (24,216)
                                         ----------------------------
Net deferred tax assets                    10,814               8,668
                                         ----------------------------
                                         $      0            $      0
                                         ============================
</TABLE>

The Company has tax net operating loss carryforwards of $45.0 million that 
expire through 2013. For financial reporting purposes, a valuation allowance 
has been recognized to offset deferred tax assets in excess of deferred tax 
liabilities since the Company has only incurred losses since inception and 
realization of such assets is not probable at January 31, 1998.


9. Retirement Plans 
The Company established a defined contribution retirement plan, Star Markets 
Retirement Estates ("SMRE"). This plan is authorized by the Board of 
Directors for the purpose of providing retirement benefits for associates of 
the Company. The plan covers associates meeting age and service eligibility 
requirements, except those represented by a labor union, unless the 
collective bargaining agreement provides for participation. Contributions to 
SMRE are made at the discretion of the Board of Directors. 

The Company also contributes to multi-employer defined benefit retirement 
plans in accordance with the provisions of the various labor contracts that 
govern the plans. The plans cover all associates represented by a labor 
union. The multi-employer plan contributions are generally
based on the number of hours worked. Information about these plans as to 
vested and nonvested accumulated benefits and net assets available for 
benefits is not available.

Retirement plan expense in each period was as follows (in thousands):

<TABLE>
<CAPTION>
                                    1997      1996      1995
                                   ------    ------    ------

<S>                                <C>       <C>       <C>
Company-sponsored plans            $1,859    $2,685    $2,271
Multi-employer plans                2,457     2,102     1,929
                                   --------------------------
                                   $4,316    $4,787    $4,200
                                   ==========================
</TABLE>

10. Related-Party Transactions
During fiscal 1995, the Company entered into two sale-leaseback transactions 
with affiliates of INVESTCORP S.A. ("Investcorp"). The Company sold six of 
its stores for an aggregate gross selling price of $53.4 million. Concurrent 
with the sale, the Company leased the properties back for an initial term of 
20 years. No gain or loss was recorded in connection with the sale-leaseback 
transactions.

In connection with the Acquisition, the Company entered into an agreement 
for management advisory and consulting services (the "Management Agreement") 
with Investcorp International Inc. ("International") pursuant to which the 
Company agreed to pay International $750,000 per annum for a five-year term. 
At the closing of the Acquisition, the Company paid International 
approximately $2.3 million for the first three years in accordance with the 
terms of the Management Agreement, with the remaining two years due in 
quarterly installments.  

11. Commitments and Contingencies
The Company has identified environmental contamination sites related 
primarily to underground petroleum tanks at various store, warehouse, and 
office facilities. At most identified locations, remediation is either 
underway or completed. Charges against earnings for environmental 
remediation were not significant in any of the periods presented.

Pursuant to the asset purchase agreement, ASC would indemnify the Company 
for the costs and expenses related to environmental contamination provided 
that the Company paid the first $1 million of such costs. However, for costs 
and expenses related to any non-governmental claim filed by a third-party, 
ASC was not liable until the aggregate of such costs and expenses exceeded 
$6 million. ASC's obligation to indemnify the Company expired on the second 
anniversary of the Closing Date, except for those locations and claims for 
which ASC has received specific notification from the Company.

Although the ultimate outcome and expense of environmental remediation is 
uncertain, the Company believes that required remediation and continuing 
compliance with environmental law will not have a material adverse effect on 
the financial position or results of operations of the Company.

From time to time, the Company has been involved in various legal 
proceedings. Management believes that all of such litigation is routine in 
nature and incidental to the conduct of the Company's business, and that 
none of such litigation, if determined adversely to the Company, would have 
a material adverse effect on the financial condition or results of 
operations of the Company.