<PAGE>
 
================================================================================




                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                             --------------------
                                   FORM 10-Q

( MARK ONE)
     
[X]            QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                      FOR THE QUARTER ENDED JUNE 27, 1998
                                      OR


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



                        COMMISSION FILE NUMBER 0-22480



                             DM MANAGEMENT COMPANY
            (Exact Name of Registrant as Specified in Its Charter)



                    DELAWARE                             04-2973769
          (State or Other Jurisdiction of             (I.R.S. Employer
           Incorporation or Organization)             Identification No.)


            25 RECREATION PARK DRIVE                         02043
                  HINGHAM, MA                             (ZIP Code)
         (Address of Principal Executive Offices)



    REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:     (781) 740-2718



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



     Shares outstanding of the Registrant's common stock (par value $0.01) at
July 31, 1998:  9,568,302



================================================================================
<PAGE>
 
                             DM MANAGEMENT COMPANY

                    INDEX TO QUARTERLY REPORT ON FORM 10-Q

                      FOR THE QUARTER ENDED JUNE 27, 1998


<TABLE> 
<CAPTION> 
                                                                                                        PAGE
                                                                                                        ----
<S>                                                                                                    <C> 
PART I - FINANCIAL INFORMATION


     Item 1.  Consolidated Financial Statements.......................................................  3-8

          Consolidated Balance Sheets at June 27, 1998, June 28, 1997 and December 27, 1997...........    3

          Consolidated Statements of Operations for the three months and the six
               months ended June 27, 1998 and  June 28, 1997..........................................    4

          Consolidated Statements of Cash Flows for the six months ended June 27, 1998
               and June 28, 1997......................................................................    5

          Notes to Consolidated Financial Statements..................................................  6-8

     Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations...  9-12

PART II - OTHER INFORMATION
     Item 4.  Submission of Matters to a Vote of Security Holders.....................................    13

     Item 6.  Exhibits and Reports on Form 8-K........................................................    14

Signatures............................................................................................    15
</TABLE> 

                                       2
<PAGE>
 
                             DM MANAGEMENT COMPANY

                          CONSOLIDATED BALANCE SHEETS


                                (IN THOUSANDS)
                                  (UNAUDITED)




<TABLE>
<CAPTION>
 
 
                      ASSETS
                                                                           JUNE 27,       JUNE 28,      DECEMBER 27,
                                                                             1998           1997            1997
                                                                         -------------  -------------  --------------
<S>                                                                   <C>                 <C>          <C>
Current assets:
 
 Cash and cash equivalents.....................................           $ 19,300       $     6,388    $      19,260
 Marketable securities, net of unrealized loss.................              3,898             3,872            3,890
 Inventory.....................................................             20,036            11,279           20,579
 Prepaid catalog expenses......................................              5,257             3,870            6,475
 Deferred income taxes.........................................              5,295             2,748            5,295
 Other current assets..........................................              3,758               779            1,229 
                                                                          --------       -----------    -------------
   Total current assets........................................             57,544            28,936           56,728
Property and equipment, net....................................             32,579             7,033           14,174 
Deferred income taxes..........................................              4,479             7,026            4,479
                                                                          --------       -----------    -------------
   Total assets................................................           $ 94,602       $    42,995    $      75,381
                                                                          ========       ===========    =============
   LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                          
Current liabilities:                                                      
                                                                          
 Accounts payable..............................................           $ 17,279       $     8,164    $      14,116 
 Accrued expenses..............................................              6,166             2,709            4,161 
 Accrued customer returns......................................              5,134             3,423            4,779 
 Short-term borrowings.........................................             13,316                --               -- 
 Current portion of  long-term debt............................                837               836              837 
                                                                          --------       -----------    -------------
   Total current liabilities...................................             42,732            15,132           23,893   
Long-term debt, less current portion...........................              3,627             4,446            8,346   
                                                                                                                       
Commitments                                                                                                            
Stockholders' equity:                                                                                                   
                                                                                                                        
 Special preferred stock (par value $0.01) 1,000,000 shares                                                             
  authorized...................................................                --                 --               --
                                                                                                                        
 Common stock (par value $0.01) 15,000,000 shares authorized,
  9,505,802, 6,991,881 and 9,147,720 shares issued and                                                                  
   outstanding as of June 27, 1998, June 28, 1997 and 
   December 27, 1997, respectively.............................                 95                70               91  
 Additional paid-in capital....................................             58,983            40,501           58,041  
 Unrealized loss on marketable securities......................                (96)             (122)            (105) 
 Accumulated deficit...........................................            (10,739)          (17,032)         (14,885) 
                                                                          --------       -----------    -------------   
   Total stockholders' equity..................................             48,243            23,417           43,142
                                                                          --------       -----------    -------------   
   Total liabilities and stockholders' equity..................           $ 94,602       $    42,995    $      75,381  
                                                                          ========       ===========    =============   
</TABLE>





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

                                       3
<PAGE>
 
                             DM MANAGEMENT COMPANY
                                        
                     CONSOLIDATED STATEMENTS OF OPERATIONS

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)
                                        


<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED              SIX MONTHS ENDED
                                                     ------------------------------  -----------------------------
                                                        JUNE 27,        JUNE 28,        JUNE 27,        JUNE 28,
                                                          1998            1997            1998            1997
                                                     --------------  --------------  --------------  --------------
<S>                                                  <C>             <C>             <C>              <C>
 
Net sales........................................       $59,359           $32,885         $104,151        $57,428        
Costs and expenses:                                                                                                       
     Product.....................................        27,009            14,563           47,450         25,415              
     Operations..................................        11,121             5,912           19,828         10,213              
     Selling.....................................        12,361             7,822           22,725         14,136              
     General and administrative..................         4,215             2,606            7,752          4,734              
     Interest, net...............................          (220)                7             (404)            68              
                                                        -------            -------         -------        -------               
                                                          
Income before income taxes.......................         4,873             1,975            6,800          2,862              
                                                        
Provision for income taxes.......................         1,900               770            2,652          1,116
                                                        -------           -------          -------        -------
Net Income.......................................       $ 2,973           $ 1,205          $ 4,148        $ 1,746       
                                                        =======           =======          =======        =======   
                                                                                                                         
EARNINGS PER SHARE:                                                                                                       
Basic:                                                                                                                 
                                                                                                               
     Earnings per share..........................       $  0.31           $  0.18          $  0.44        $  0.26           
                                                        =======           =======          =======        =======    
                                                                                       
     Weighted average shares outstanding.........         9,465             6,823            9,376          6,794           

Diluted:                                                                                                         

     Earnings per share..........................       $  0.28           $  0.16         $   0.40        $  0.23
                                                        =======           =======         ========        ======= 
 
     Weighted average shares outstanding.........        10,455             7,727           10,379          7,585 
 
 
 
</TABLE>



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

                                       4
<PAGE>
 
                             DM MANAGEMENT COMPANY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)
                                  (UNAUDITED)
                                        



<TABLE>
<CAPTION>
 
 
 
                                                                                              SIX MONTHS ENDED
                                                                                      ---------------------------------
                                                                                         JUNE 27,          JUNE 28,
                                                                                           1998              1997
                                                                                      ---------------  ----------------
<S>                                                                                  <C>              <C>
 
 
Cash flows from operating activities:
 
    Net income.............................................................            $   4,148         $     1,746 

Adjustments to reconcile net income to net cash provided by operating
 activities:

    Depreciation...........................................................                1,270                 754
    Deferred income taxes..................................................                   --                 824
    Liability for expected losses..........................................                   --                (152)
 
Changes in assets and liabilities:
                                                                                       
    Decrease in inventory..................................................                  543               1,358 
    (Increase) decrease in prepaid catalog expenses........................                1,218              (1,156)
    (Increase) decrease in other current assets............................               (2,529)                 97 
    Increase in accounts payable and accrued expenses......................                5,168                 853        
    Increase in accrued customer returns...................................                  355               2,114  
                                                                                       ---------         ----------- 
Net cash provided by operating activities..................................               10,173               6,438  
                                                                                                         
                                                                                       
Cash flows used in investing activities:                                               
                                                                                         
 
    Additions to property and equipment....................................              (19,675)               (614) 
                                                                                       ---------         -----------  
Net cash used in investing activities......................................              (19,675)               (614)  
                                                                                         
                                                                                         
Cash flows provided by financing activities:                                                                         
                                                                                           
    Borrowings under debt agreements.......................................               28,616               5,764      
    Payments of debt borrowings............................................              (20,019)             (6,039) 
    Proceeds from stock transactions.......................................                  945                 455  
                                                                                       ---------         -----------
Net cash provided by financing activities..................................                9,542                 180  
                                                                                       
                                                                                       
 
Net increase in cash and cash equivalents..................................                   40               6,004  
 
 
Cash and cash equivalents at:
 
    Beginning of period....................................................               19,260                 384     
                                                                                       ---------         -----------
    End of period..........................................................            $  19,300         $     6,388 
                                                                                       =========         ===========  
 
 
</TABLE>



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

                                       5
<PAGE>
 
                             DM MANAGEMENT COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


     The financial statements included herein have been prepared by DM
Management Company (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and in the opinion of
management contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the interim periods presented.  The results of
operations for such interim periods are not necessarily indicative of the
results to be expected for the full year.  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
rules and regulations.  Accordingly, although the Company believes that the
disclosures are adequate to make the information presented not misleading, these
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report to Stockholders for the fiscal year ended December 27, 1997.

A.  DEBT:

     The Company's credit facilities at June 27, 1998  consisted of (i) a
$1,650,000 real estate loan (the "Real Estate Loan"); (ii) a $3,600,000 term
loan (the "Term Loan");  (iii) an $8,500,000 revolving line of credit (the
"Revolver");  (iv) a $17,000,000 line of credit (the "Line of Credit"); and (v)
a $4,300,000 short-term note (the "Short-Term Note").  All of the Company's
credit facilities are collateralized  by a security interest in substantially
all assets of the Company. These credit facilities contain various lending
conditions and covenants, including restrictions on permitted liens and required
compliance with certain financial coverage ratios.  Subsequent to June 27, 1998
the Company's credit facilities were amended to modify the calculation of
certain financial coverage ratio requirements.

     Payments on the Real Estate Loan are due monthly, based on a 15-year
amortization, with the remaining balance payable on July 30, 2002.  Interest on
the Real Estate Loan is fixed at 6.81% per annum until August 31, 1999, at which
time the Company may select from several interest rate options.  Payments on the
Term Loan are due quarterly through its maturity on June 1, 2002.  The Term Loan
provides for several interest rate options.  At June 27, 1998, the Term Loan
bore interest at 7.19% per annum.  The Revolver provides for several interest
rate options and expires on June 1, 1999. There were no amounts outstanding
under the revolver at June 27, 1998.  The Company is required to pay a
commitment fee of 1/8th of 1% per annum on the unused portion of the Revolver
commitment.  Borrowings under the Line of Credit bear interest at LIBOR plus 125
base points repriced monthly and are payable in full on December 31, 1998.  The
Company is not required to pay a commitment fee on the unused portion of the
Line of Credit commitment.  There was $9,016,000 outstanding under the Line of
Credit at June 27, 1998.  The Short-Term Note matures on December 31, 1998 and
bears interest at 7.06% per annum.

     A summary of the Company's outstanding long-term debt follows (in
thousands):

<TABLE>
<CAPTION>
                                                         JUNE 27,        JUNE 28,      DECEMBER 27,
                                                           1998            1997            1997
                                                      --------------  --------------  --------------
<S>                                                   <C>             <C>             <C>
Real estate loans.................................        $1,558            $1,650           $1,613
Term loans........................................         2,880             3,600            7,540         
Capitalized lease obligations.....................            26                32               30         
                                                          ------            ------           ------         
     Total long-term debt.........................         4,464             5,282            9,183          
                                                                                                                
Less current maturities...........................           837               836              837         
                                                          ------            ------           ------         
     Long-term debt, less current portion.........        $3,627            $4,446           $8,346         
                                                          ======            ======           ======         
</TABLE>

B.  STOCK SPLIT:

     On May 29, 1998, the Company announced a three-for-two stock split to be
effected in the form of a stock dividend payable on June 30, 1998 to
shareholders of record on June 12, 1998.  The balance sheets  and all earnings
per share information have been retroactively restated for all periods presented
to include the effects of the stock split.

                                       6
<PAGE>
 
                     DM MANAGEMENT COMPANY AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
 
                                  (UNAUDITED)

C.  EARNINGS PER SHARE:

     The Company calculates earnings per share ("EPS") in accordance with
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per
Share."  Basic EPS excludes potentially dilutive securities and is computed by
dividing net income available to common stockholders by the weighted average
number of common shares outstanding during the period.  Diluted EPS  reflects
the potential dilution that could occur if securities or other contracts to
issue common shares were exercised or converted into common shares that then
shared in the earnings of the entity.  EPS data for the period ended June 28,
1997 has been restated to conform to the provisions of SFAS 128.  A
reconciliation of the numerators and denominators of  the basic and diluted 
EPS calculation before and after the stock split follows (in thousands, except
per share data):

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED             SIX MONTHS ENDED        
                                                -----------------------------  ---------------------------  
                                                  JUNE 27,        JUNE 28,       JUNE 27,       JUNE 28,    
POST-STOCK SPLIT                                    1998            1997           1998          1997       
                                                -------------  --------------  ------------- -------------  
<S>                                            <C>             <C>             <C>           <C>             
Numerator:
   Net income................................     $ 2,973          $1,205          $ 4,148       $1,746                  
                                                  =======          ======          =======       ======                  
Denominator (shares):                                                                                                    
   Basic weighted average shares outstanding.       9,465           6,823            9,376        6,794                  
   Assumed exercise of stock options.........         990             904            1,003          791        
                                                  -------          ------          -------       ------                  
   Diluted weighted average shares                                                               
    outstanding..............................      10,455           7,727           10,379        7,585                  
                                                  =======          ======          =======       ======                  
Earnings per share:                                                                              
     Basic...................................     $  0.31          $ 0.18          $  0.44       $ 0.26
     Diluted.................................     $  0.28          $ 0.16          $  0.40       $ 0.23
<CAPTION>
                                                     THREE MONTHS ENDED             SIX MONTHS ENDED        
                                                -----------------------------  ---------------------------  
                                                  JUNE 27,        JUNE 28,       JUNE 27,       JUNE 28,    
PRE-STOCK SPLIT                                     1998            1997           1998          1997       
                                                -------------  --------------  ------------- -------------  
<S>                                            <C>             <C>             <C>           <C>             
Numerator:
   Net income................................      $2,973          $1,205           $4,148       $1,746
                                                   ======          ======           ======       ======
Denominator (shares):
   Basic weighted average shares outstanding.       6,310           4,548            6,251        4,529
   Assumed exercise of stock options.........         660             603              668          528
                                                   ------          ------           ------       ------         
   Diluted weighted average shares                        
    outstanding..............................       6,970           5,151            6,919        5,057
                                                   ======          ======           ======       ======
Earnings per share:                               
     Basic...................................      $ 0.47          $ 0.26           $ 0.66       $ 0.39
     Diluted.................................      $ 0.43          $ 0.23           $ 0.60       $ 0.35
</TABLE>

D.  RECENT ACCOUNTING STANDARDS:

     In June 1997 the Financial Accounting Standards Board (the "FASB") issued
Statement No. 130 ("SFAS 130"), "Reporting Comprehensive Income."  The Company
has determined that the impact of this statement is immaterial to these
consolidated financial statements.

     In June 1997 the FASB issued Statement No. 131, ("SFAS 131"), "Disclosures
about Segments of an Enterprise and Related Information" which establishes new
standards for the way public companies report information about operating
segments and requires companies to report selected segment information quarterly
to stockholders.  This statement is effective for financial statements for
periods beginning after December 15, 1997 and requires comparative information
for earlier years to be restated.  This statement need not be applied to interim
financial statements in the initial year of its application.  Management is
currently evaluating the effect of this statement on its reporting of segment
information.

                                       7
<PAGE>
 
                     DM MANAGEMENT COMPANY AND SUBSIDIARY



           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
 
                                    (UNAUDITED)


E.  COMMITMENTS:


     In fiscal 1997 the Company began constructing a new operations and
fulfillment center in Tilton, New Hampshire.  This new facility is expected to
be operational by early 1999.  The estimated cost of this new facility,
including land, construction and equipment, ranges from $39.0 to $41.0 million.

     Subsequent to June 27, 1998 the Company entered into a lease agreement for
a new J. Jill catalog outlet store.  The original term of the lease is five
years, to begin in August 1998.  Minimum annual lease payments due under the
lease are approximately $40,000.  The Company has an option to terminate the
lease within one year of its inception.

                                       8
<PAGE>
 
ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


     The following discussion contains forward-looking  statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which
involves risks and uncertainties.  For this purpose, any statements contained
herein or incorporated herein that are not statements of historical fact may be
deemed to be forward-looking statements.  Without limiting the generality of the
foregoing, the words "anticipates," "plans," "expects" and similar expressions
are intended to identify forward-looking statements.  The Company's actual
results, performance or achievements  may differ significantly from the results
discussed in or implied by the forward-looking statements. Factors that might
cause such a difference include, but are not limited to the following:  delays
in completing construction of the Company's new Tilton, New Hampshire operations
and fulfillment center; difficulties in managing the transition of operations to
the new Tilton facility; delays or problems in implementing the Company's new
order management and warehouse management systems; failure of the Company or its
significant vendors to become Year 2000 compliant; the ability of  the Company
to effectively liquidate its overstocked merchandise; significant changes in
customer response rates; changes in consumer spending and consumer preferences;
increasing competition in the apparel industry; success of operating
initiatives; changes in business strategy; advertising and promotional efforts;
quality of management; possible future increases in operating costs;
availability, terms and deployment of capital; brand awareness; availability of
qualified personnel; business abilities and judgment of personnel; labor and
employee benefit costs; general economic and business conditions; change in, or
the failure to comply with, government regulations, and other factors.


RESULTS OF OPERATIONS

The following table sets forth the Company's consolidated statements of
operations expressed as a percentage of net sales and certain selected operating
data:
<TABLE>
<CAPTION>
 
                                                           THREE MONTHS ENDED     SIX MONTHS ENDED
                                                       ----------------------  ----------------------
                                                        JUNE 27,    JUNE 28,    JUNE 27,    JUNE 28,
CONSOLIDATED STATEMENT OF OPERATIONS:                     1998        1997        1998        1997
                                                       ----------  ----------  ----------  ----------
<S>                                                  <C>          <C>          <C>          <C>
Net sales.........................................       100.0%       100.0%       100.0%       100.0% 
Costs and expenses:
     Product......................................        45.5         44.3         45.6         44.3
     Operations...................................        18.8         18.0         19.1         17.8 
     Selling......................................        20.8         23.8         21.8         24.6 
     General and administrative...................         7.1          7.9          7.4          8.2 
     Interest, net................................        (0.4)           -         (0.4)         0.1 
                                                         -----       ------       ------       ------
Income before income taxes........................         8.2          6.0          6.5          5.0 
Provision for income taxes........................         3.2          2.3          2.5          2.0  
                                                         -----       ------       ------       ------  
Net income........................................         5.0%         3.7%         4.0%         3.0% 
                                                         =====       ======       ======       ======  
SELECTED OPERATING DATA (IN THOUSANDS):
Catalog circulation (1)                                 18,600       12,400       33,400       21,500
Active customers (2)                                     1,103          724        1,103          724
                                                                            
 
</TABLE>



     (1)  In order to more closely match net sales to catalog circulation, the
          Company calculates catalog circulation on a percentage of completion
          basis.  This calculation takes into account the total number of
          catalogs mailed during all periods and the Company's estimate of the
          expected sales life of each catalog edition.  As used throughout this
          Form 10-Q, the term "catalog circulation" refers to circulation of the
          Company's catalogs calculated in such fashion.

     (2)  As used throughout this Form 10-Q, the term "active customer" means
          customers who have made a purchase from the Company within the 24
          months preceding the stated period end.



COMPARISON OF THE THREE MONTHS ENDED JUNE 27, 1998 WITH THE THREE MONTHS ENDED
JUNE 28, 1997

Net Sales


     During the three months ended June 27, 1998 ("second quarter 1998") net
sales increased by 80.5% to $59.4 million from $32.9 million during the three
months ended June 28, 1997 ("second quarter 1997").  This net sales growth was
primarily attributable to significant sales volume increases from the Company's
J. Jill concept. During second quarter 1998 J. Jill net sales and circulation
increased by 186.1% and 135.5%, respectively, as compared to second quarter
1997.   J. Jill's net sales growth was primarily attributable to circulation
growth, an increased average order size and improved response rates.   During
second quarter 1998 net sales and circulation for the Nicole Summers concept
decreased by 8.3% and 22.9%, respectively, as compared to second quarter 1997 as
the 

                                       9
<PAGE>
 
Company focused on improving the concept's profitability. Total Company catalog
circulation increased by 50.0% to 18.6 million during second quarter 1998 from
12.4 million during second quarter 1997. The number of active customers grew to
1.1 million at June 27, 1998 from 0.7 million at June 28, 1997, an increase of
52.3%. Although the Company plans to continue its aggressive customer
acquisition strategy, it does not expect the same year over year circulation
growth it has experienced since implementing the strategy in the third quarter
of 1997.


Product


     Product costs consist primarily of merchandise acquisition costs (net of
term discounts and advertising allowances), including freight costs, and
provisions for markdowns.  During second quarter 1998 product costs increased by
85.5% to $27.0 million from $14.6 million during second quarter 1997.  As a
percentage of net sales,  product costs increased to  45.5% during second
quarter 1998 from 44.3% during second quarter 1997.  The increase in product
costs as a percentage of net sales is primarily attributable to an increase in
markdown charges associated with the Company's  Nicole Summers concept as lower
than anticipated sales volume from the   Nicole Summers  clearance catalogs
resulted in more overstocks than expected. The Company expects product costs as
a percentage of net sales to remain at or near the current level for the
remainder of fiscal 1998.


Operations


     Operating expenses consist primarily of order processing costs, such as
telemarketing, customer service, fulfillment, shipping, warehousing and credit
card processing costs.  During second quarter 1998 operating expenses increased
by 88.1% to $11.1 million from $5.9 million during second quarter 1997.  As a
percentage of net sales, operating expenses increased to 18.8% during second
quarter 1998 from 18.0% during second quarter 1997.  The Company's recent growth
has accelerated its need to increase its fulfillment capacity.  The Company
currently fulfills orders out of its Meredith, New Hampshire facility and two
leased interim satellite facilities.  This arrangement has generated operational
inefficiencies, as well as increased costs, both of which are expected to
continue through the first year of operation in the Company's new Tilton, New
Hampshire facility, which is currently under construction.  The Company
currently expects the ratio of operating expenses to net sales to improve by
fiscal 2000.


Selling


     Selling expenses consist primarily of the cost to produce, print and
distribute catalogs.  During second quarter 1998 selling expenses increased by
58.0% to $12.4 million from $7.8 million during second quarter 1997.  As a
percentage of  net sales, selling expenses decreased to 20.8% during second
quarter 1998 from  23.8% during second quarter 1997.  This decrease was
primarily the result of improved catalog productivity in second quarter 1998 as
compared to second quarter 1997. The Company does not expect to maintain the
catalog productivity levels achieved during second quarter 1998. The anticipated
decreases in catalog productivity combined with expected paper and printing cost
increases may result in selling expenses as a percentage of net sales exceeding
second quarter levels during the remainder of fiscal 1998.


General and Administrative


     General and administrative  expenses consist primarily of executive,
marketing, information systems and finance expenses.  During second quarter 1998
general and administrative  expenses increased by 61.7% to $4.2 million from
$2.6 million during second quarter 1997.  This increase is primarily
attributable to increased salaries and performance bonuses and increased
depreciation and insurance costs.  As a percentage of net sales, general and
administrative expenses decreased to 7.1% during first quarter 1998 from 7.9%
during first quarter 1997.


COMPARISON OF THE SIX MONTHS ENDED JUNE 27, 1998 WITH THE SIX MONTHS ENDED
JUNE 28, 1997

Net Sales


     During the six months ended June 27, 1998 net sales increased by 81.4% to
$104.2 million from $57.4 million during the six months ended June 28, 1997.
This net sales increase was primarily attributable to significant sales volume
increases from the Company's J. Jill concept.  During the six months ended June
27, 1998 J. Jill net sales and circulation increased by 199.0% and 140.7%,
respectively, as compared to the six months ended June 28, 1997.  J. Jill's net
sales growth was primarily attributable to circulation growth, an increased
average order size and improved response rates. During the six months ended June
27, 1998 net sales and circulation for the Nicole Summers concept decreased by
5.4% and 9.9%, respectively, as compared to the six months ended June 28, 1997
as the Company focused on improving the concept's profitability.  Total Company
catalog circulation increased by 55.3% to 33.4 million during the six months
ended June 27, 1998 from 21.5 million during the six months ended June 28, 1997.

                                       10
<PAGE>
 
Product


     During the six months ended June 27, 1998 product costs increased by 86.7%
to $47.5 million from $25.4 million during the six months ended June 28, 1997.
As a percentage of net sales,  product costs increased to  45.6% during the six
months ended June 27, 1998 from 44.3% during the six months ended June 28, 1997.
During the first quarter of 1998 the Company implemented a new strategic
merchandising initiative designed to maximize the recovery rate of "wear-now"
carry-over items and minimize future potential markdowns by offering moderately
discounted fall season merchandise in the Company's early Spring season
catalogs.  This strategy, combined with increased  markdown charges associated
with the Company's Nicole Summers concept during second quarter 1998,   resulted
in the increase in product costs as a percentage of net sales during the six
months ended June 27, 1998 as compared to the six months ended June 28, 1997.


Operations


     During the six months ended June 27, 1998 operating expenses increased by
94.1% to $19.8 million from $10.2 million during the six months ended June 28,
1997.  As a percentage of net sales, operating expenses increased to 19.1%
during the six months ended June 27, 1998 from 17.8% during the six months ended
June 28, 1997.  Inefficiencies associated with the Company's operation of
multiple fulfillment centers, discussed above, are primarily responsible for the
increase in operating costs as a percentage of net sales.


Selling


     During the six months ended June 27, 1998 selling expenses increased by
60.8% to $22.7 million from $14.1 million during the six months ended June 28,
1997.  As a percentage of  net sales, selling expenses decreased to 21.8% during
the six months ended June 27, 1998 from  24.6% during the six months ended June
28, 1997.  This decrease was primarily the result of  improved catalog
productivity in the six months ended June 27, 1998 as compared to the six months
ended June 28, 1997.


General and Administrative



     During the six months ended June 27, 1998 general and administrative
expenses increased by 63.8% to $7.8 million from $4.7 million during the six
months ended June 28, 1997.  This increase is primarily attributable to
increased salaries and performance bonuses, increased outside consulting fees,
and increased depreciation and insurance costs.  As a percentage of net sales,
general and administrative expenses decreased to 7.4% during the six months
ended June 27, 1998 from 8.2% during the six months ended June 28, 1997.


INCOME TAXES


     The Company provides for income taxes at an effective tax rate that
includes the full federal and state statutory tax rates.  The Company's
effective tax rate for the six months ended June 27, 1998 and six months ended
June 28, 1997 was 39.0%.



LIQUIDITY AND CAPITAL RESOURCES


     During the six months ended June 27, 1998, the Company funded its working
capital needs through cash generated from operations.  The Company used working
capital to support costs incurred in advance of revenue generation, primarily
inventory acquisition and catalog development, production and mailing costs
incurred prior to the beginning of each selling season.  The Company has two
selling seasons which correspond to the fashion seasons.  The Fall season begins
in July and ends in December.  The Spring season begins in January and ends in
early July.



     The Company's credit facilities at June 27, 1998 consisted of (i) a $1.7
million real estate loan (the "Real Estate Loan"); (ii) a $3.6 million term loan
(the "Term Loan"); (iii) an $8.5 million revolving line of credit (the
"Revolver"); (iv) a $17.0 million line of credit (the "Line of Credit"); and (v)
a $4.3 million short-term note (the "Short-Term Note").  All of the Company's
credit facilities  are collateralized by a security interest in substantially
all assets of the Company. These credit facilities contain various lending
conditions and covenants, including restrictions on permitted liens and required
compliance with certain financial coverage ratios.  Subsequent to June 27, 1998
the Company's credit facilities were amended to modify the calculation of
certain financial coverage ratio requirements.



     Payments on the Real Estate Loan are due monthly, based on a 15-year
amortization, with the remaining balance payable on July 30, 2002.  Interest on
the Real Estate Loan is fixed at 6.81% per annum until August 31, 1999, at which
time the Company may select from several interest rate options.  Payments on the
Term Loan are due quarterly through its maturity on June 1, 2002. The Term Loan
provides for several interest rate options.  At June 27, 1998, the Term Loan
bore interest at 7.19% per annum.  The Revolver provides for several interest
rate options and expires on June 1, 1999.  The Company is required to pay a
commitment fee of 1/8th of 1% per annum on the unused portion of the Revolver
commitment.  There were no amounts outstanding under the Revolver at June 27,

                                       11
<PAGE>
 
1998.  Borrowings under the  Line of Credit bear interest at LIBOR plus 125
basis points repriced monthly and are payable in full on December 31, 1998.  The
Company is not required to pay a commitment fee on the unused portion of the
Line of Credit commitment.  There was $9.0 million outstanding under the Line of
Credit at June 27, 1998.  The Short-Term Note matures on December 31, 1998 and
bears interest at 7.06% per annum.


     Cash used in investing activities totaled $19.7 million during the six
months ended June 27, 1998 and $0.6 million during the six months ended June 28,
1998.  During the six months ended June 27, 1998 investing activities include
approximately $17.3 million in construction costs related to the Company's new
operations and fulfillment center in Tilton, New Hampshire.  At June 27, 1998
approximately $13.3 million of the $17.3 million had been financed through the
use of short-term borrowings.



     Inventory levels at June 27, 1998 were 77.6% higher than at June 28, 1997,
primarily due to the past and future projected growth in the business.  Prepaid
catalog expenses at June 27, 1998 were 35.8% higher than at June 28, 1997
primarily due to higher paper inventory balances at June 27, 1998.  The increase
in paper inventory is primarily a result of the increased circulation levels for
the Company's catalogs and increased paper costs.



     In fiscal 1997 the Company began constructing a new operations and
fulfillment center in Tilton, New Hampshire.  This new facility is expected to
be operational by early 1999. The estimated cost of this new facility, including
land, construction and equipment, ranges from $39.0 million to $41.0 million, of
which approximately $23.3 million had been spent as of June 27, 1998. The
Company intends to finance the cost of this new facility with a portion of the
net proceeds from its recently completed public offering, bank financing and by
other financing arrangements, which may include, without limitation, additional
bank financing, a sale-leaseback transaction, government sponsored financing or 
a public or private placement of debt. The Company is currently upgrading its
order management and warehouse management systems. Total expenditures to be
capitalized for the systems project are estimated at approximately $4.0 million,
of which approximately $2.0 million had been spent as of June 27, 1998.



     Subsequent to June 27, 1998, the Company sold its marketable securities and
recognized an after tax loss of $0.1 million.  The proceeds from this sale will
be used to fund construction of the new operations and fulfillment center and
working capital needs.



     The Company expects that its cash and cash equivalents, existing credit
facilities, anticipated new credit facilities, and cash flows from operations
will be sufficient to provide the capital resources necessary to support the
Company's capital and operating needs for the foreseeable future.



FUTURE CONSIDERATIONS


     The Company is currently planning to introduce an assortment of bed, bath
and gift items in one of its Fall 1998 J. Jill catalogs.  The Company does not
expect this offering to significantly affect its financial condition, results of
operations or cash flows during fiscal 1998.  In addition, the Company plans to
circulate its first bed, bath and gift edition of the J. Jill catalog in the
Spring of 1999.

     Subsequent to June 27, 1998, the Company entered into a lease agreement for
a new J. Jill catalog outlet store.


RECENT ACCOUNTING STANDARDS


     In June 1997 the Financial Accounting Standards Board (the "FASB") issued
Statement No. 130 ("SFAS 130"), "Reporting Comprehensive Income".  The Company
has determined that the impact of this statement is immaterial to its
consolidated financial statements.


     In June 1997 the FASB issued Statement No. 131, ("SFAS 131"), "Disclosures
about Segments of an Enterprise and Related Information" which establishes new
standards for the way public companies report information about operating
segments and requires companies to report selected segment information quarterly
to stockholders.  This statement is effective for financial statements for
periods beginning after December 15, 1997 and requires comparative information
for earlier years to be restated.  This statement need not be applied to interim
financial statements in the initial year of its application.  Management is
currently evaluating the effect of this statement on its reporting of segment
information.

                                       12
<PAGE>
 
                          PART II - OTHER INFORMATION

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

  The Company held an Annual Meeting of Stockholders on May 28, 1998.  At the
Annual Meeting, the stockholders of the Company voted to approve the following
actions by the following votes:

 1.  To fix the number of directors that shall constitute the whole Board of
     Directors of the Company at six.
<TABLE>
<CAPTION>  
                                                                                  NUMBER OF SHARES
                                                                                 ------------------
<S>                                                                              <C>
          For..................................................................           5,522,381 
          Against..............................................................              15,250 
          Abstain..............................................................               1,007   
</TABLE>

 2.  To elect the following individuals as Directors of the Company:

<TABLE>
<CAPTION> 
                                                                                       WITHHOLDING 
Class B                                                             FOR                 AUTHORITY 
-------                                                       ------------------  ------------------
<S>                                                           <C>                 <C> 
  Walter J. Levison.........................................         5,350,398           188,240 
  Ruth M. Owades............................................         5,349,298           189,340
</TABLE>

3.   To amend the 1993 Incentive and Nonqualified Stock Option Plan to
     increase the number of shares of common stock that may be issued pursuant
     to the options granted thereunder from 1,200,000 to 1,600,000.

<TABLE>
<CAPTION>  
                                                                                 NUMBER OF SHARES
                                                                                 ----------------
<S>                                                                              <C>
               For.............................................................       2,505,079
               Against.........................................................       1,690,746
               Abstain.........................................................           2,577 
               Broker non-votes................................................       1,340,236     
</TABLE>

4.   To approve the 1998 Employee Stock Purchase Plan.
<TABLE>
<CAPTION> 
                                                                                 NUMBER OF SHARES
                                                                                 ----------------
<S>                                                                              <C>
               For.............................................................        3,874,965
               Against.........................................................          320,650
               Abstain.........................................................            2,787 
               Broker non-votes................................................        1,340,236              
</TABLE>

                                       13
<PAGE>
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K



     (1)  EXHIBITS


CERTIFICATE OF INCORPORATION AND BY-LAWS


     3.1  Restated Certificate of Incorporation of the Company (included as
          Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the
          quarter ended September 25, 1993, File No. 0-22480, and incorporated
          herein by reference)

     3.2  By-Laws of the Company, as amended (included as Exhibit 3.2 to the
          Company's Current Report on Form 8-K dated January 14, 1997, File No.
          0-22480, and incorporated herein by reference)


MATERIAL CONTRACTS


     10.1 First Amendment to Second Amended and Restated Loan Agreement dated
          June 30, 1998 between the Company and Citizens Bank of Massachusetts



     10.2 Lease Agreement dated June 11, 1998 between the Company and Reading
          Outlet Center Associates D/B/A Mass Realty Company



     10.3 Amended and Restated 1993 Incentive and Nonqualified Stock Option
          Plan (included as Appendix A to the Company's definitive Proxy
          Statement  for its annual meeting of stockholders held on May 28,
          1998, File No. 0-22480, and incorporated herein by reference)



     10.4 1998 Employee Stock Purchase Plan (included as Appendix B to the
          Company's definitive Proxy Statement for its annual meeting of
          stockholders held on May 28, 1998, File No. 0-22480, and incorporated
          herein by reference)


FINANCIAL DATA SCHEDULE


     27.1 Financial Data Schedule



     (2)  REPORTS ON FORM 8-K

     The Company has not filed any reports on Form 8-K during the quarter ended
June 27, 1998.

                                       14
<PAGE>
 
                                    SIGNATURES



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



                                    DM Management Company



Dated:  August 10, 1998                  By:  /s/ Olga L. Conley
                                             -----------------------------------
                                             Olga L. Conley
                                             Authorized Officer
                                             Senior Vice President - Finance,
                                             Chief Financial Officer and
                                             Treasurer (Principal Financial
                                             Officer)


Dated:  August 10, 1998                  By:  /s/ Peter J. Tulp
                                             -----------------------------------
                                             Peter J. Tulp
                                             Authorized Officer
                                             Vice President - Finance,
                                             Corporate Controller (Principal
                                             Accounting Officer)

                                       15
<PAGE>
 
                      DM MANAGEMENT COMPANY & SUBSIDIARY

                         QUARTERLY REPORT ON FORM 10-Q

                      FOR THE QUARTER ENDED JUNE 27, 1998



                                 EXHIBIT INDEX



 EXHIBIT NO.    DESCRIPTION
 -----------    -----------


CERTIFICATE OF INCORPORATION AND BY-LAWS


     3.1  Restated Certificate of Incorporation of the Company (included as
          Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the
          quarter ended September 25, 1993, File No. 0-22480, and incorporated
          herein by reference)

     3.2  By-Laws of the Company, as amended (included as Exhibit 3.2 to the
          Company's Current Report on Form 8-K dated January 14, 1997, File No.
          0-22480, and incorporated herein by reference)

MATERIAL CONTRACTS


     10.1 First Amendment to Second Amended and Restated Loan Agreement dated
          June 30, 1998 between the Company and Citizens Bank of Massachusetts



     10.2 Lease Agreement dated June 11, 1998 between the Company and Reading
          Outlet Center Associates D/B/A Mass Realty Company



     10.3 Amended and Restated 1993 Incentive and Nonqualified Stock Option
          Plan (included as Appendix A to the Company's definitive Proxy
          Statement for its annual meeting of stockholders held on May 28, 1998,
          File No. 0-22480, and incorporated herein by reference)



     10.4 1998 Employee Stock Purchase Plan (included as Appendix B to the
          Company's definitive Proxy Statement for its annual meeting of
          stockholders held on May 28, 1998, File No. 0-22480, and incorporated
          herein by reference)


FINANCIAL DATA SCHEDULE


     27.1 Financial Data Schedule