<PAGE>   1
================================================================================
                                  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 28, 1997
                                       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: (617) 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
August 4, 1997: 4,667,854

================================================================================

<PAGE>   2

                       DM MANAGEMENT COMPANY & SUBSIDIARY
                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 28, 1997



<TABLE>
<CAPTION>

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

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

                  Consolidated Balance Sheets at June 28, 1997, June 29, 1996 and December 28, 1996................................3

                  Consolidated Statements of Operations for the three months and the six months ended June 28, 1997 and
                        June 29, 1996 .............................................................................................4

                  Consolidated Statements of Cash Flows for the six months
                        ended June 28, 1997 and June 29, 1996......................................................................5

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

         Item 2.  Management's Discussion and Analysis of Consolidated 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


Signature.........................................................................................................................15

</TABLE>

                                       2
<PAGE>   3



                       DM MANAGEMENT COMPANY & SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                             (AMOUNTS IN THOUSANDS)
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                        JUNE 28,        JUNE 29,        DECEMBER 28,
                                     ASSETS                                               1997            1996              1996
                                                                                     -------------     -----------      ------------
<S>                                                                                     <C>              <C>              <C>
Current assets:
     Cash and cash equivalents .................................................        $  6,388         $    221         $    384
     Marketable securities, net of unrealized loss .............................           3,872            3,858            3,879
     Inventory .................................................................          11,279           10,866           12,637
     Prepaid catalog expenses ..................................................           3,870            4,154            2,714
     Deferred income taxes .....................................................           2,748             --              2,670
     Other current assets ......................................................             779            1,098              724
                                                                                        --------         --------         --------
          Total current assets .................................................          28,936           20,197           23,008
Property and equipment, net ....................................................           7,033            6,872            7,173
Deferred income taxes ..........................................................           7,026             --              7,928
                                                                                        --------         --------         --------
          Total assets .........................................................        $ 42,995         $ 27,069         $ 38,109
                                                                                        ========         ========         ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable ..........................................................        $  8,164         $  9,651         $  8,143
     Accrued expenses ..........................................................           2,709            1,438            1,877
     Accrued customer returns ..................................................           3,423            1,231            1,309
     Current portion of  long-term debt ........................................             836              889            1,017
                                                                                        --------         --------         --------
          Total current liabilities ............................................          15,132           13,209           12,346

Long-term debt .................................................................           4,446            4,380            4,540
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,
          4,661,254, 4,305,293 and 4,456,908 shares issued and outstanding as of
          June 28, 1997, June 29, 1996 and December 28, 1996,
          respectively .........................................................              46               43               44
     Additional paid-in capital ................................................          40,501           39,890           40,048
     Unrealized loss on marketable securities ..................................            (122)            (136)            (115)
     Accumulated deficit .......................................................         (17,008)         (30,317)         (18,754)
                                                                                        --------         --------         --------
          Total stockholders' equity ...........................................          23,417            9,480           21,223
                                                                                        --------         --------         --------
          Total liabilities and stockholders' equity ...........................        $ 42,995         $ 27,069         $ 38,109
                                                                                        ========         ========         ========
</TABLE>


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

                                       3
<PAGE>   4



                       DM MANAGEMENT COMPANY & SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                 THREE MONTHS ENDED              SIX MONTHS ENDED
                                                            --------------------------      -------------------------

                                                               JUNE 28,       JUNE 29,        JUNE 28,        JUNE 29,
                                                                1997           1996             1997            1996
                                                                ----           ----             ----            ----

<S>                                                          <C>             <C>              <C>             <C>
Net sales ...........................................        $ 32,885        $ 21,582         $ 57,428        $ 41,318
Costs and expenses:
     Product ........................................          14,563           9,507           25,415          17,769
     Operations .....................................           5,912           3,701           10,213           7,092
     Selling ........................................           7,822           6,201           14,136          11,997
     General and administrative .....................           2,606           1,512            4,734           3,397
     Interest, net ..................................               7              55               68             179
                                                             --------        --------         --------        --------

Income from continuing operations before income taxes           1,975             606            2,862             884
Provision for income taxes ..........................             770              61            1,116              89
                                                             --------        --------         --------        --------

Income from continuing operations ...................           1,205             545            1,746             795

Discontinued operations:
     Loss from operations ...........................              --            (490)              --            (476)
     Loss on disposal ...............................              --          (8,511)              --          (8,511)
                                                             --------        --------         --------        --------
     Loss from discontinued operations ..............              --          (9,001)              --          (8,987)
                                                             --------        --------         --------        --------


Net income (loss) ...................................        $  1,205        $ (8,456)        $  1,746        $ (8,192)
                                                             ========        ========         ========        ========

NET INCOME (LOSS) PER SHARE:
Primary:
     Continuing operations ..........................        $   0.23        $   0.11         $   0.35        $   0.17
     Discontinued operations ........................              --           (1.90)              --           (1.94)
                                                             --------        --------         --------        --------
     Net income (loss) per share ....................        $   0.23        $  (1.79)        $   0.35        $  (1.77)
                                                             ========        ========         ========        ========

Weighted-average common and common equivalent shares
     outstanding ....................................           5,151           4,737            5,057           4,620

Fully diluted:
     Continuing operations ..........................        $   0.23        $   0.11         $   0.34        $   0.17
     Discontinued operations ........................              --           (1.87)              --           (1.92)
                                                             --------        --------         --------        --------
     Net income (loss) per share ....................        $   0.23        $  (1.76)        $   0.34        $  (1.75)
                                                             ========        ========         ========        ========

Weighted-average common and common equivalent shares
     outstanding ....................................           5,238           4,795            5,210           4,674
</TABLE>






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

                                        4

<PAGE>   5



                      DM MANAGEMENT COMPANY AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                   SIX MONTHS ENDED
                                                                           -------------------------------

                                                                             JUNE 28,          JUNE 29,
                                                                               1997              1996
                                                                           -------------    --------------

<S>                                                                        <C>                  <C>
Cash flows from operating activities:
     Net income (loss) ........................................            $  1,746             $ (8,192)
Adjustments to reconcile net income (loss) to net cash provided
  by operating activities:
     Depreciation .............................................                 754                  478
     Deferred income taxes ....................................                 824                   --
     Liability for expected losses ............................                (152)               2,658
     Write-off of intangible assets ...........................                  --                5,336
     Amortization related to discontinued operations ..........                  --                  189
Changes in assets and liabilities:
     (Increase) decrease in inventory .........................               1,358               (1,012)
     (Increase) decrease in prepaid catalog expenses ..........              (1,156)               1,512
     (Increase) decrease  in other current assets .............                  97                 (161)
     Increase in accounts payable and accrued expenses ........                 853                3,153
     Increase in accrued customer returns .....................               2,114                  366
                                                                           --------             --------
Net cash provided by operating activities .....................               6,438                4,327
Cash flows used in investing activities:
     Additions to property and equipment ......................                (614)                (678)
     Proceeds from sale of marketable securities ..............                  --                    6
     Payment for purchase of Carroll Reed .....................                  --                 (907)
                                                                           --------             --------
Net cash used in investing activities .........................                (614)              (1,579)
Cash flows provided by (used in) financing activities:
     Borrowings under debt agreements .........................               5,764               13,109
     Payments of debt borrowings ..............................              (5,935)             (15,918)
     Principal payments on capital lease obligations ..........                (104)                 (86)
     Proceeds from stock transactions .........................                 455                   27
                                                                           --------             --------
Net cash provided by (used in) financing activities ...........                 180               (2,868)
Net increase (decrease) in cash and cash equivalents ..........               6,004                 (120)
Cash and cash equivalents at:
     Beginning of period ......................................                 384                  341
                                                                           --------             --------
     End of period ............................................            $  6,388             $    221
                                                                           ========             ========
SUPPLEMENTAL INFORMATION:
Cash paid for interest ........................................            $    231             $    292
Cash paid for taxes, including discontinued operations ........            $    131             $     --
</TABLE>


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

                                       5
<PAGE>   6

                      DM MANAGEMENT COMPANY AND SUBSIDIARY
                   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 transition period ended December 28, 1996.


A.  DISCONTINUED OPERATIONS:

     On May 20, 1996, the Company announced its plan to divest its Carroll Reed
segment. Accordingly, the Carroll Reed segment has been accounted for as a
discontinued operation, and all assets, liabilities, results of operations and
cash flows associated with the Carroll Reed segment have been segregated from
those associated with continuing operations. In connection with this
divestiture, the Company recorded a charge of $8,511,000 for the loss on
disposal of discontinued operations consisting of $5,336,000 related to the
write-off of the remaining unamortized intangible assets and $3,175,000 for
expected losses during the phase-out period. As of June 28, 1997, the Company
had completed the phase-out of its Carroll Reed segment and had substantially
utilized its reserve for expected losses. The results of the Carroll Reed
operations through May 20, 1996 have been classified as a loss from discontinued
operations in the accompanying consolidated statements of operations for the
periods ending June 29,1996.

     The net current assets and liabilities of the Carroll Reed segment, which
have been included in other current assets in the accompanying consolidated
balance sheets, are summarized below (in thousands):

<TABLE>
<CAPTION>
                                                      JUNE 29,        DECEMBER 28,
                                                       1996               1996
                                                     ---------------------------
<S>                                                   <C>                <C>
Current assets:
   Inventory ............................             $2,477             $   --
   Prepaid catalog expenses .............                492                 --
   Other current assets .................                149                 49
                                                      ------             ------
      Total current assets ..............              3,118                 49
                                                      ------             ------

Current liabilities:
   Accounts payable and accrued expenses                 286                 --
   Accrued customer returns .............                173                  9
   Liability for expected losses ........              2,658                231
                                                      ------             ------
      Total current liabilities .........              3,117                240
                                                      ------             ------
         Net current assets (liabilities)
           of discontinued operations ...             $    1             $ (191)
                                                      ======             ======
</TABLE>

                                       6
<PAGE>   7



                      DM MANAGEMENT COMPANY AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


B.  DEBT:


     During second quarter 1997, the Company refinanced its existing debt by
entering into a loan agreement with a new bank. The aggregate principal
availability under the new loan agreement totals $13,750,000. At June 28, 1997,
the credit facilities provided for in the new loan agreement consisted of (i) a
$1,650,000 interim loan (the "Interim Loan"); (ii) a $3,600,000 term loan (the
"Term Loan"); (iii) a $6,000,000 revolving line of credit (the "Revolver"); and,
(iv) a $2,500,000 line for the issuance of commercial letters of credit (the
"Letter of Credit Line").

     The Interim Loan was replaced by a $1,650,000 real estate loan (the "Real
Estate Loan") on July 30, 1997. 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 commencing on
September 2, 1997 through its maturity on June 1, 2002. The Term Loan provides
for several interest rate options. At June 28, 1997 the Term Loan bore interest
at 7.28% per annum. Both the Revolver and the Letter of Credit Line expire on
June 1, 1999. The Revolver also provides for several interest rate options.
There were no outstanding Revolver borrowings at June 28, 1997. Outstanding
letters of credit at June 28, 1997 totaled approximately $1,669,000.

     The Company is required to pay a commitment fee of 1/8th of 1% per annum on
the unused portion of the Revolver commitment. All of the credit facilities
under the new loan agreement are collateralized by a first lien mortgage on the
Company's distribution center in Meredith, New Hampshire. The Term Loan is also
collateralized by the Company's marketable securities and substantially all
assets of the Company. The Revolver and the Letter of Credit Line are also
collateralized by substantially all assets of the Company, except the Company's
marketable securities. The terms of the new loan agreement contain various
lending conditions and covenants, including restrictions on permitted liens and
required compliance with certain financial coverage ratios.

     A summary of the Company's outstanding credit facilities follows (in
thousands):
<TABLE>
<CAPTION>

                                                   JUNE 28,           JUNE 29,         DECEMBER 28,
                                                    1997               1996               1996
                                                  ------------------------------------------------

<S>                                                <C>               <C>                <C>
Interim Loan/Real Estate Loan ............         $1,650            $1,476             $1,421
Term Loan ................................          3,600                --              4,000
Revolver .................................             --             3,602                 --
Capitalized lease obligations ............             32               191                136
                                                   ------            ------             ------
     Total debt ..........................          5,282             5,269              5,557
     Less current maturities .............            836               889              1,017
                                                   ------            ------             ------
     Long-term debt ......................         $4,446            $4,380             $4,540
                                                   ======            ======             ======
</TABLE>



C.  NET INCOME (LOSS)  PER SHARE:

     Net income (loss) per share ("EPS") is computed by dividing net income
(loss) by the weighted-average number of shares of common stock and common stock
equivalents outstanding during the period. Common stock equivalents consist of
common stock issuable on the exercise of outstanding stock options and are
calculated using the treasury method.


D.  RECLASSIFICATIONS:

     Certain financial statement amounts have been reclassified to be consistent
with current period presentation.


                                       7
<PAGE>   8



                      DM MANAGEMENT COMPANY AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONCLUDED)


E.  RECENT ACCOUNTING STANDARDS:

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 ("SFAS 128"), "Earnings per Share," which modifies the way in which EPS
is calculated and disclosed. Currently, the Company discloses primary and fully
diluted EPS. SFAS 128 requires the disclosure of basic and diluted EPS for
financial statements issued for periods ending after December 15, 1997. The
restatement of all prior period EPS data presented is also required upon
adoption. 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 for the period. Diluted EPS, similar to
fully diluted EPS, reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock that then shared in the earnings of the entity. Early
application of SFAS 128 is not permitted.

     The following table summarizes the Company's EPS and weighted-average
common and common equivalent shares outstanding on a pro-forma basis as
calculated under SFAS 128. 
<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                                 ---------------------------          ----------------------------
                                                                 JUNE 28,           JUNE 29,           JUNE 28,           JUNE 29,
                                                                   1997               1996               1997               1996
<S>                                                              <C>               <C>                <C>               <C>
Pro-forma Basic EPS:                                             ---------         ---------          ----------       -----------
     Continuing operations .........................             $   0.26          $   0.13           $   0.39          $   0.19
     Discontinued operations .......................                --                (2.10)             --                (2.10)
                                                                 --------          --------           --------          --------
     Net income (loss) per share ...................             $   0.26          $  (1.97)          $   0.39          $  (1.91)
                                                                 ========          ========           ========          ========
Weighted-average common and common equivalent shares
     outstanding....................................                4,548             4,297              4,529             4,292

Pro-forma Diluted EPS:
     Continuing operations .........................             $   0.23          $   0.11           $   0.35          $   0.17
     Discontinued operations .......................                --                (1.90)             --                (1.94)
                                                                 --------          --------           --------          --------
     Net income (loss) per share ...................             $   0.23          $  (1.79)          $   0.35          $  (1.77)
                                                                 ========          ========           ========          ========
Weighted-average common and common equivalent shares
     outstanding ...................................                5,151             4,737              5,057             4,620
</TABLE>


F.  COMMITMENTS:

     Subsequent to June 28, 1997 the Company signed a letter of intent to
purchase approximately 360 acres of land in Tilton, New Hampshire for
$3,650,000. The site is intended to house an approximately 300,000 square foot
distribution center to be completed by the end of 1998. Construction is expected
to begin promptly. The estimated cost of this new state-of-the-art facility,
including land, construction and equipment, ranges from $20.0 to $25.0 million.


                                        8

<PAGE>   9



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

     RESULTS OF OPERATIONS

          Overview

          Income from continuing operations before income taxes increased over
     225% to $2.0 million for the three months ended June 28, 1997 ("second
     quarter 1997") as compared to $0.6 million for the three months ended June
     29, 1996 ("second quarter 1996"). Income from continuing operations
     increased 121% to $1.2 million for second quarter 1997 from $0.5 million
     for second quarter 1996. Income from continuing operations per share was
     $0.23 for second quarter 1997, more than twice the $0.11 reported for
     second quarter 1996. The Company attributes its profit improvement to
     strong customer response to its new business strategies which focus on
     creative presentation, merchandise differentiation and brand building. The
     Company's J. Jill title performed particularly well during the three months
     and six months ended June 28, 1997. In addition, the combination of the
     Company's The Very Thing! concept into its Nicole Summers title permitted
     the Company to realize certain operational and selling efficiencies during
     the three months and six months ended June 28, 1997.

          The following table represents the Company's consolidated statements
     of operations as a percentage of net sales:
<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                                 -------------------------       -----------------------
                                                                 JUNE 28,         JUNE 29,        JUNE 28,      JUNE 29,
                                                                   1997             1996            1997          1996

<S>                                                              <C>              <C>             <C>            <C>
Net sales ...........................................            100.0%           100.0%          100.0%         100.0%
Costs and expenses:
     Product ........................................             44.3             44.1            44.3           43.0
     Operations .....................................             18.0             17.1            17.8           17.2
     Selling ........................................             23.8             28.7            24.6           29.1
     General and administrative .....................              7.9              7.0             8.2            8.2
     Interest, net ..................................             --                0.3             0.1            0.4
                                                                 -----            -----           -----          -----
Income from continuing operations before income taxes              6.0              2.8             5.0            2.1
Provision for income taxes ..........................              2.3              0.3             2.0            0.2
                                                                 -----            -----           -----          -----
Income from continuing operations ...................              3.7              2.5             3.0            1.9
Loss from discontinued operations ...................             --              (41.7)           --            (21.7)
                                                                 -----            -----           -----          -----
Net income (loss) ...................................              3.7%           (39.2)%           3.0%         (19.8)%
                                                                 =====            =====           =====          =====
</TABLE>


     COMPARISON OF THE THREE MONTHS ENDED JUNE 28, 1997 WITH THE THREE MONTHS
     ENDED JUNE 29, 1996

          Sales and Circulation

          Second quarter 1997 net sales increased 52.4% over second quarter 1996
     net sales, as catalog circulation, page counts, response rates and average
     order size all increased. The Company attributes its increased response
     rates and average order size to the creative and merchandising changes it
     has implemented, including its use of a "total look" wardrobing concept,
     and to its adoption of a more targeted circulation strategy that has cut
     back on duplicate mailings while expanding prospecting. Prospecting
     circulation as a percent of total circulation increased significantly
     compared to last year, as the Company continued its plan to aggressively
     grow sales and increase active customer counts.

          Product Costs

          Product costs as a percentage of net sales were slightly higher for
     second quarter 1997 as compared to second quarter 1996 due to increased
     promotional activity. In May 1997, the Company circulated a new
     promotionally priced edition of its Nicole Summers catalog, designed to
     compete with late-in-the-season retail store offerings. This catalog
     provided the Company with an opportunity to grow sales by offering new
     merchandise at value prices while at the same time serving as an excellent
     vehicle to liquidate overstocked in-season merchandise without taking the
     deep discounts typically found in a sale book. The resulting impact on the
     Company's product cost percentage was partially offset by lower markdown
     charges in second quarter 1997 as compared to second quarter 1996.




                                       9

<PAGE>   10



          Operations

          Operations expense as a percentage of net sales increased in second
     quarter 1997 as compared to second quarter 1996 as higher than expected
     demand levels resulted in order processing inefficiencies. Backorder
     processing costs, including increased packages per order, resulted in
     increased postage and handling charges. The Company anticipates that these
     order processing inefficiencies will continue into the Fall season. During
     second quarter 1997 these order processing inefficiencies were partially
     offset by efficiencies achieved from the merger of the Company's The Very
     Thing! concept into its Nicole Summers title.

          Selling

          Improved catalog productivity and lower paper prices resulted in a 4.9
     percentage point decline in selling costs as a percentage of net sales in
     second quarter 1997 as compared to second quarter 1996.

          General and Administrative

          General and administrative expenses increased 72.4% for second quarter
     1997 over second quarter 1996, from $1.5 million to $2.6 million, primarily
     as a result of outside consulting fees for various systems and facilities
     projects, increased depreciation and occupancy costs and increased
     management infrastructure.


     COMPARISON OF THE SIX MONTHS ENDED JUNE 28, 1997 WITH THE SIX MONTHS ENDED
     JUNE 29, 1996

          Sales and Circulation

          Net sales for the six months ended June 28, 1997 increased 39.0% over
     the same period in the prior year. Catalog circulation, page counts,
     customer response rates and average order size all increased as compared
     to the same period a year ago. Creatively distinctive catalog design,
     differentiation in merchandising execution and a more targeted circulation
     strategy were critical elements affecting the Spring season sales growth.
     Prospecting circulation as a percent of total circulation increased
     significantly compared to last year, as the Company continued its plan to
     aggressively grow sales and increase active customer counts.

          Product Costs

          Product costs as a percentage of net sales were higher for the six
     months ended June 28, 1997 as compared to the six months ended June 29,
     1996 due in part to increased promotional activity in the current year. In
     order to grow sales and be more competitive with its retail store
     competition, the Company began a program to offer in-season merchandise at
     promotional, rather that sale, prices. This increased promotional activity
     resulted in the increased product cost percentage during the first six
     months of 1997 as compared to 1996.

          Operations

          Operations expense as a percentage of net sales increased for the six
     months ended June 28, 1997 as compared to the six months ended June 29,
     1996, as order processing costs increased due to higher than expected
     demand. Efficiencies achieved as a result of the merger of the Company's
     The Very Thing! concept into its Nicole Summers title helped to somewhat
     offset these additional costs.

          Selling

          Increased catalog productivity and lower paper prices resulted in the
     4.5 percentage point decrease in selling expenses as a percentage of net
     sales during the six months ended June 28, 1997 as compared to the same
     period in the prior year.

          General and Administrative

          General and administrative expenses increased 39.4% for the six months
     ended June 28, 1997 compared to the six months ended June 29, 1996, but
     were unchanged as a percentage of net sales. The increase in general and
     administrative expenses was primarily a result of outside consulting fees
     on various systems and facilities projects, increased depreciation and
     occupancy costs and increased management infrastructure.


                                       10
<PAGE>   11





     INCOME TAXES

          The Company provides for income taxes at an effective tax rate that
     includes the full federal and state statutory tax rates. Prior to
     December 1996, the Company reduced the income tax provision recorded in
     its financial statements by recording a tax benefit associated with its
     net deferred tax assets, primarily net operating loss carryforwards
     ("NOL's"). Because of the uncertainty surrounding the realizability of
     these assets, the Company placed a valuation allowance against the entire
     balance of its net deferred tax assets. As a result, the Company
     recognized the associated tax benefit as income was earned. This resulted
     in a significantly lower effective tax rate for all periods reported
     prior to December 1996.

          In December 1996, management determined that it was more likely than
     not that the Company would earn sufficient book and taxable income to fully
     realize the benefit of its deferred tax assets. This determination required
     the Company to remove the valuation allowance and recognize the deferred
     tax benefit of $10,598,000 at December 28, 1996 in its entirety. Because,
     for financial statement purposes, the benefit associated with the Company's
     deferred tax assets has been fully realized, the Company's effective rate
     can no longer be reduced by the recognition of this tax benefit over future
     periods of income generation. As a result, the Company's tax provision is
     substantially larger this year than in the prior year. Cash payments for
     income taxes continue to be reduced by available NOL's resulting in cash
     payments which are significantly less than the income tax provision
     recorded for financial statement purposes during 1997.

     DISCONTINUED OPERATIONS

          On May 20, 1996, the Company announced its plan to divest its Carroll
     Reed segment. Accordingly, the Carroll Reed segment has been accounted for
     as a discontinued operation, and all assets, liabilities, results of
     operations and cash flows associated with the Carroll Reed segment have
     been segregated from those associated with continuing operations. The net
     loss from this discontinued operation for 1997 has been charged to the
     liability for expected losses established in connection with the
     divestiture. As of June 28, 1997, the Company had completed the phase-out
     of its Carroll Reed segment and had fully utilized its reserve for expected
     losses. The results of operations for the Caroll Reed segment for 1996 have
     been classified as income from discontinued operations in the accompanying
     consolidated statements of operations.


     LIQUIDITY AND CAPITAL RESOURCES

          During the six months ended June 28, 1997, the Company funded its
     working capital needs through cash generated from operations and through
     use of its credit facilities. 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.

          During second quarter 1997, the Company refinanced its existing debt
     by entering into a loan agreement with a new bank. The aggregate principal
     availability under the new loan agreement totals $13,750,000. At June 28,
     1997, the credit facilities provided for in the new loan agreement
     consisted of (i) a $1,650,000 interim loan (the "Interim Loan"); (ii) a
     $3,600,000 term loan (the "Term Loan"); (iii) a $6,000,000 revolving line
     of credit (the "Revolver"); and, (iv) a $2,500,000 line for the issuance of
     commercial letters of credit (the "Letter of Credit Line").

          The Interim Loan was replaced by a $1,650,000 real estate loan (the
     "Real Estate Loan") on July 30, 1997. 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 commencing on September 2, 1997 through its maturity on June 1,
     2002. The Term Loan provides for several interest rate options. At June 28,
     1997 the Term Loan bore interest at 7.28% per annum. Both the Revolver and
     the Letter of Credit Line expire on June 1, 1999. The Revolver also
     provides for several interest rate options. There were no outstanding
     Revolver borrowings at June 28, 1997. Outstanding letters of credit at June
     28, 1997 totaled approximately $1,669,000.

          The Company was considerably more liquid at June 28, 1997 than at June
     29, 1996 as cash and cash equivalents totaled $6.4 million versus $0.2
     million for the respective periods. Cash used in investing activities was
     $614,000 for the six months ended June 28, 1997, and $1.6 million for the
     six months ended June 29, 1996. Capital investments for both periods
     included additions to property and equipment. In 1996, investing activities
     included a final payment for the purchase of Carroll Reed.

                                     11

<PAGE>   12




          Inventory levels at June 28, 1997 were only 3.8% higher than at June
     29, 1996 due to the timing of receipts of Fall season merchandise. Prepaid
     catalog expenses at June 28, 1997 were 6.8% lower than at June 29, 1996.
     This decline is primarily attributable to lower paper inventory balances on
     hand at June 28, 1997 than at June 29, 1996.

          Subsequent to June 28, 1997, the Company signed a letter of intent to
     purchase approximately 360 acres of land in Tilton, New Hampshire for
     $3,650,000. The site is intended to house an approximately 300,000 square
     foot distribution center to be completed by the end of 1998. Construction
     is expected to begin promptly. The estimated cost of this new
     state-of-the-art facility, including land, construction and equipment
     ranges from $20.0 to $25.0 million.

          Management intends to use the Company's capital resources to fund the
     development and construction of its new distribution center as well as to
     upgrade its information systems. Anticipated expenditures to upgrade its
     existing information systems are estimated at approximately $2.0 million.
     The Company's existing credit facilities and those expected to be
     available in the future, and its cash flows from operations, are expected
     to provide the capital resources necessary to support the Company's
     capital and operating needs for the foreseeable future.


     RECENT ACCOUNTING STANDARDS

          In February 1997, the Financial Accounting Standards Board issued
     Statement No. 128 ("SFAS 128"), "Earnings per Share," which modifies the
     way in which earnings per share ("EPS") is calculated and disclosed.
     Currently, the Company discloses primary and fully diluted EPS. SFAS 128
     requires the disclosure of basic and diluted EPS for financial statements
     issued for periods ending after December 15, 1997. The restatement of all
     prior period EPS data presented is also required upon adoption. 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 for the period. Diluted EPS, similar to fully
     diluted EPS, reflects the potential dilution that could occur if securities
     or other contracts to issue common stock were exercised or converted into
     common stock that then shared in the earnings of the entity. Early
     application of SFAS 128 is not permitted. See Note E to the accompanying
     consolidated financial statements.

     FORWARD-LOOKING STATEMENTS

          The above discussion includes forward-looking statements. Such
     forward-looking statements involve known and unknown risks, uncertainties,
     and other factors which may cause the actual results, performance or
     achievements of the Company to be materially different from any future
     results, performance or achievements expressed or implied by such
     forward-looking statements. Such factors include, among others, the
     following: changes in consumer spending and consumer preferences; general
     economic and business conditions; increasing competition in the apparel
     industry; success of operating initiatives; possible future increases in
     operating costs; advertising and promotional efforts; brand awareness; the
     existence or absence of adverse publicity; changes in business strategy;
     quality of management; availability, terms and deployment of capital;
     business abilities and judgment of personnel; availability of qualified
     personnel; labor and employee benefit costs; change in, or the failure to
     comply with, government regulations; and other factors.


                                     12
<PAGE>   13



                        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 8, 1997. 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.

                                                                Number of Shares
                                                                ----------------

           For.............................................            3,664,454
           Against.........................................                5,598
           Abstain.........................................                  250

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

                                                                     Withholding
                                                      For              Authority
                                                      ---              ---------
           CLASS A
                William E. Engbers...................  3,514,275         156,027
                Samuel L. Shanaman...................  3,509,086         161,216
           CLASS B
                Ruth M. Owades.......................  3,513,693         156,609
           CLASS C
                Thomas J. Litle......................  3,514,275         156,027

     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 700,000 to 1,200,000.

                                                                Number of Shares
                                                                ----------------

          For....................................................      2,097,727
          Against................................................        235,487
          Abstain................................................            850
          Broker non-votes.......................................      1,336,238

     4.   To amend the 1993 Incentive and Nonqualified Stock Option Plan further
          to alter the formula stock option grants thereunder to non-employee
          directors of the Company.


                                                                Number of Shares
                                                                ----------------

          For...................................................       3,413,167
          Against...............................................         232,488
          Abstain...............................................           1,038
          Broker non-votes......................................          23,609


                                       13

<PAGE>   14



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   Loan Agreement dated June 5, 1997 between the Company and
                 Citizens Bank of Massachusetts

          10.2   Revolving Note dated June 5, 1997 between the Company and
                 Citizens Bank of Massachusetts

          10.3   Term Note dated June 5, 1997 between the Company and Citizens
                 Bank of Massachusetts

          10.4   Interim Note dated June 5, 1997 between the Company and 
                 Citizens Bank of Massachusetts

          10.5   Security Agreement dated June 5, 1997 between the Company 
                 and Citizens Bank of Massachusetts

          10.6   Grant of Security Interest in Trademarks dated June 5, 1997
                 between the Company and Citizens Bank of Massachusetts

          10.7   Account Control Agreement dated June 5, 1997 between the 
                 Company and Citizens Bank of Massachusetts

          10.8   Real Estate Note dated July 30, 1997 between the Company and
                 Citizens Bank of Massachusetts

          10.9   Mortgage dated July 30, 1997 between the Company and Citizens
                 Bank of Massachusetts

          10.10  Letter of Intent to purchase certain land in Tilton, New
                 Hampshire, dated July 8, 1997 between the Company and Pike
                 Industries Inc.

PER SHARE EARNINGS

          11.1   Statement re: computation of per share earnings

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 28, 1997.

                                       14

<PAGE>   15



                                    SIGNATURE


          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 11, 1997                       By:   /S/ Samuel L. Shanaman 
                                                  ------------------------------
                                                   Samuel L. Shanaman
                                                   Authorized Officer
                                                   Executive Vice President,
                                                   Chief Operating Officer
                                                   and Chief Financial Officer
                                                   (Principal Financial Officer)

                                       15

<PAGE>   16


                       DM MANAGEMENT COMPANY & SUBSIDIARY
                          QUARTERLY REPORT ON FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 28, 1997

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.      DESCRIPTION                                                           PAGE
-----------      -----------                                                           ----
                                                                                           
<S>              <C>                                                                   <C>      
3.1              Restated Certificate of Incorporation of the Company                      
                                                                                           
3.2              By-Laws of the Company, as amended                                        
                                                                                           
10.1             Loan Agreement dated June 5, 1997 between the Company and                 
                 Citizens Bank of Massachusetts                                         17 
                                                                                           
10.2             Revolving Note dated June 5, 1997 between the Company and                 
                 Citizens Bank of Massachusetts                                         53 
                                                                                           
10.3             Term Note dated June 5, 1997 between the Company and                      
                 Citizens Bank of Massachusetts                                         56 
                                                                                           
10.4             Interim Note dated June 5, 1997 between the Company and                   
                 Citizens Bank of Massachusetts                                         59 
                                                                                           
10.5             Security Agreement dated June 5, 1997 between the Company                 
                 and Citizens Bank of Massachusetts                                     62 
                                                                                           
10.6             Grant of Security Interest in Trademarks dated June 5, 1997               
                 between the Company and Citizens Bank of Massachusetts                 73 
                                                                                           
10.7             Account Control Agreement dated June 5, 1997 between the                  
                 Company and Citizens Bank of Massachusetts                             78 
                                                                                           
10.8             Real Estate Note dated July 30, 1997 between the Company and              
                 Citizens Bank of Massachusetts                                         83 
                                                                                           
10.9             Mortgage dated July 30, 1997 between the Company and                      
                 Citizens Bank of Massachusetts                                         86 
                                                                                           
10.10            Letter of Intent to purchase certain land in Tilton, New                  
                 Hampshire, dated July 8, 1997 between the Company and Pike                
                 Industries Inc.                                                        93 
                                                                                           
11.1             Statement re: computation of per share earnings                        98 
                                                                                           
27.1             Finciancial Data Schedule                                             100 
</TABLE>
        

                                      16