<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 SEPTEMBER 27, 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: (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 November 5, 1997: 5,675,786

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



<PAGE>   2



                       DM MANAGEMENT COMPANY & SUBSIDIARY

                     INDEX TO QUARTERLY REPORT ON FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 27, 1997




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

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

                  Consolidated Balance Sheets at September 27, 1997, September 28, 1996 and December 28, 1996.................3

                  Consolidated Statements of Operations for the three months and the nine months ended
                                    September 27, 1997 and September 28, 1996 ................................................4

                  Consolidated Statements of Cash Flows for the nine months ended September 27, 1997 and
                                    September 28, 1996........................................................................5

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

         Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations....................9-13


PART II - OTHER INFORMATION

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


Signature....................................................................................................................15
</TABLE>



                                        2

<PAGE>   3



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



<TABLE>
<CAPTION>
                                                                                 SEPTEMBER 27,     SEPTEMBER 28,     DECEMBER 28,
                                   ASSETS                                            1997              1996              1996
                                                                                 -------------     -------------     ------------
<S>                                                                                <C>               <C>               <C>     
Current assets:
     Cash and cash equivalents .................................................   $    582          $    296          $    384
     Marketable securities, net of unrealized loss .............................      3,888             3,862             3,879
     Inventory .................................................................     18,498            10,200            12,637
     Prepaid catalog expenses ..................................................      5,949             3,875             2,714
     Deferred income taxes .....................................................      2,748                --             2,670
     Other current assets ......................................................      2,218             1,915               724
                                                                                   --------          --------          --------
          Total current assets .................................................     33,883            20,148            23,008
Property and equipment, net ....................................................      7,930             6,994             7,173
Deferred income taxes ..........................................................      7,026                --             7,928
                                                                                   --------          --------          --------
          Total assets .........................................................   $ 48,839          $ 27,142          $ 38,109
                                                                                   ========          ========          ========
                                                                                                                    
                    LIABILITIES AND STOCKHOLDERS' EQUITY                                                            
                                                                                                                    
Current liabilities:                                                                                                
     Accounts payable ..........................................................   $ 10,685          $  6,943          $  8,143
     Accrued expenses ..........................................................      3,258             1,658             1,877
     Accrued customer returns ..................................................      3,752             1,441             1,309
     Short-term borrowings .....................................................         --             1,721                --
     Current portion of long-term debt .........................................        836               864             1,017
                                                                                   --------          --------          --------
          Total current liabilities ............................................     18,531            12,627            12,346
                                                                                                                    
Long-term debt, less current portion ...........................................      6,150             4,769             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,                                                   
      4,675,786, 4,326,157 and 4,456,908 shares issued and outstanding as of                                        
      September 27, 1997, September 28, 1996 and December 28,                                                       
      1996, respectively .......................................................         47                43                44
     Additional paid-in capital ................................................     40,535            39,902            40,048
     Unrealized loss on marketable securities ..................................       (107)             (132)             (115)
     Accumulated deficit .......................................................    (16,317)          (30,067)          (18,754)
                                                                                   --------          --------          --------
          Total stockholders' equity ...........................................     24,158             9,746            21,223
                                                                                   --------          --------          --------
          Total liabilities and stockholders' equity ...........................   $ 48,839          $ 27,142          $ 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
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED            NINE MONTHS ENDED
                                                             ----------------------------  ----------------------------

                                                             SEPTEMBER 27,  SEPTEMBER 28,  SEPTEMBER 27,  SEPTEMBER 28,
                                                                 1997           1996           1997           1996
                                                             -------------  -------------  -------------  -------------
<S>                                                            <C>            <C>            <C>            <C>     
Net sales ..................................................   $ 31,649       $ 20,541       $ 89,077       $ 61,859
Costs and expenses:
     Product ...............................................     13,984          9,088         39,399         26,857
     Operations ............................................      6,335          3,299         16,548         10,391
     Selling ...............................................      7,459          5,680         21,595         17,677
     General and administrative ............................      2,720          2,114          7,454          5,511
     Interest, net .........................................         18             82             86            261
                                                               --------       --------       --------       --------

Income from continuing operations before income taxes ......      1,133            278          3,995          1,162
Provision for income taxes .................................        442             28          1,558            117
                                                               --------       --------       --------       --------

Income from continuing operations ..........................        691            250          2,437          1,045

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

Net income (loss) ..........................................   $    691       $    250       $  2,437       $ (7,942)
                                                               ========       ========       ========       ========

NET INCOME (LOSS) PER SHARE:
Primary:
     Continuing operations .................................   $   0.13       $   0.05       $   0.48       $   0.22
     Discontinued operations ...............................         --             --             --          (1.93)
                                                               --------       --------       --------       --------
     Net income (loss) per share ...........................   $   0.13       $   0.05       $   0.48       $  (1.71)
                                                               ========       ========       ========       ========

Weighted-average common and common equivalent
     shares outstanding ....................................      5,268          4,730          5,127          4,657

Fully diluted:
     Continuing operations .................................   $   0.13       $   0.05       $   0.46       $   0.22
     Discontinued operations ...............................         --             --             --          (1.91)
                                                               --------       --------       --------       --------
     Net income (loss) per share ...........................   $   0.13       $   0.05       $   0.46       $  (1.69)
                                                               ========       ========       ========       ========

Weighted-average common and common equivalent
     shares outstanding ....................................      5,308          4,730          5,270          4,693
</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
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                                      NINE MONTHS ENDED
                                                                                               --------------------------------

                                                                                               SEPTEMBER 27,      SEPTEMBER 28,
                                                                                                    1997                1996
                                                                                               -------------      -------------

<S>                                                                                               <C>                <C>      
Cash flows from operating activities:
     Net income (loss) ....................................................................       $ 2,437            $ (7,942)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                       
     Depreciation .........................................................................         1,226                 744
     Deferred income taxes ................................................................           824                  -- 
     Liability for expected losses ........................................................          (162)              1,761
     Write-off of intangible assets .......................................................            --               5,336
     Amortization related to discontinued operations ......................................            --                 189
Changes in assets and liabilities:                                                                             
     Increase in inventory ................................................................        (5,861)               (346)
     (Increase) decrease in prepaid catalog expenses ......................................        (3,235)              1,791
     Increase in other current assets .....................................................        (1,333)                (81)
     Increase in accounts payable and accrued expenses ....................................         3,923                 665
     Increase in accrued customer returns .................................................         2,443                 576
                                                                                                  -------            --------
Net cash provided by operating activities .................................................           262               2,693
Cash flows used in investing activities:                                                                       
     Additions to property and equipment ..................................................        (1,983)             (1,028)
     Proceeds from sale of marketable securities ..........................................            --                   6
     Payment for purchase of Carroll Reed .................................................            --                (907)
                                                                                                  -------            --------
Net cash used in investing activities .....................................................        (1,983)             (1,929)
Cash flows provided by (used in) financing activities:                                                         
     Borrowings under debt agreements .....................................................        10,679              21,569
     Payments of debt borrowings ..........................................................        (9,144)            (22,287)
     Principal payments on capital lease obligations ......................................          (106)               (130)
     Proceeds from stock transactions .....................................................           490                  39
                                                                                                  -------            --------
Net cash provided by (used in) financing activities .......................................         1,919                (809)
Net increase (decrease) in cash and cash equivalents ......................................           198                 (45)
Cash and cash equivalents at:                                                                                  
     Beginning of period ..................................................................           384                 341
                                                                                                  -------            --------
     End of period ........................................................................       $   582            $    296
                                                                                                  =======            ========
SUPPLEMENTAL INFORMATION:                                                                                      
                                                                                                               
Cash paid for interest ....................................................................       $   333            $    416
Cash paid for taxes .......................................................................       $   401            $     --
</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.  DEBT:

      Pursuant to the Company's loan agreement with a commercial bank, the
Company's credit facilities at September 27, 1997 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) 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"). All of the credit facilities under the loan agreement
are collateralized by a first lien mortgage on the Company's operations and
fulfillment center in Meredith, New Hampshire and a security interest in
substantially all assets of the Company other than its marketable securities.
The Term Loan is also collateralized by the Company's marketable securities. The
terms of the Company's credit facilities contain various lending conditions and
covenants, including restrictions on permitted liens and required compliance
with certain financial coverage ratios.

      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 5, 1997 through its maturity
on June 1, 2002. The Term Loan provides for several interest rate options. At
September 27, 1997 the Term Loan bore interest at 7.22% per annum. Outstanding
letters of credit at September 27, 1997 totaled approximately $1,155,000.

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

<TABLE>
<CAPTION>
                                                                    SEPTEMBER 27,        SEPTEMBER 28,         DECEMBER 28,
                                                                         1997                 1996                 1996
                                                                    -------------        -------------         ------------
        
        <S>                                                             <C>                  <C>                  <C>   
        Real estate loans ........................................      $1,641               $1,448               $1,421
        Term loans ...............................................       3,420                    -                4,000
        Revolver borrowings ......................................       1,895                4,000                    -
        Capitalized lease obligations ............................          30                  185                  136
                                                                        ------               ------               ------
             Total long-term debt ................................       6,986                5,633                5,557
             Less current maturities .............................         836                  864                1,017
                                                                        ------               ------               ------
             Long-term debt, less current portion ................      $6,150               $4,769               $4,540
                                                                        ======               ======               ======
</TABLE>

      At September 28, 1996, the Company also had short-term borrowings
outstanding of $1,721,000. The Company had no short-term borrowings outstanding
at September 27, 1997.

      Subsequent to September 27, 1997, the Company and its bank negotiated an
amendment to the Company's credit facilities that, among other things, increased
the aggregate principal availability thereunder from $13,750,000 to $18,050,000,
included the Company's recently purchased land in Tilton, New Hampshire as
collateral for all borrowings thereunder and combined the Revolver and Letter of
Credit Line into a single $8,500,000 facility (the "New Revolver"). The New
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 New Revolver commitment. The increase in aggregate
principal availability was used to fund a $4,300,000 bridge loan (the "Bridge
Loan") that bears interest at 7.25% per annum and expires on February 28, 1998.
The Company expects to negotiate a construction loan to finance some of the cost
of constructing the Company's new Tilton, New Hampshire facility. That
construction loan would replace the Bridge Loan.


                                       6


<PAGE>   7

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



B.  DISCONTINUED OPERATIONS:

      On May 20, 1996, the Company announced its plan to divest its Carroll Reed
segment due to the incompatibility of the customer base and product line of this
segment with those of its other 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. The results of the
Carroll Reed operations through May 20, 1996 have been classified as loss from
discontinued operations in the accompanying consolidated statement of operations
for the nine months ended September 28, 1996. Since May 20, 1996, the results of
this discontinued operation have been charged to the liability from expected
losses established in connection with the divestiture and have had no impact on
the Company's operating results. The Company has completed the phase-out of its
Carroll Reed segment and has utilized its reserve for expected losses.

      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>
                                                                                        SEPTEMBER 28,    DECEMBER 28,
                                                                                            1996              1996
                                                                                        ------------     ------------
           <S>                                                                             <C>               <C>  
        Current assets:
           Inventory ..............................................................        $1,968            $   -
           Prepaid catalog expenses ...............................................           328                -
           Other current assets ...................................................            30               49
                                                                                           ------            -----
              Total current assets ................................................         2,326               49
                                                                                           ------            -----
        
        Current liabilities:
           Accounts payable and accrued expenses ..................................            16                -
           Accrued customer returns ...............................................            59                9
           Liability for expected losses ..........................................         1,761              231
                                                                                           ------            -----
              Total current liabilities ...........................................         1,836              240
                                                                                           ------            -----
                 Net current assets (liabilities) of discontinued operations ......        $  490            $(191)
                                                                                           ======            =====
</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.



                                        7

<PAGE>   8



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


D.  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               NINE MONTHS ENDED
                                                                    -----------------------------  ------------------------------

                                                                    SEPTEMBER 27,   SEPTEMBER 28,  SEPTEMBER 27,    SEPTEMBER 28,
                                                                        1997            1996            1997            1996
                                                                    -------------   -------------  -------------    -------------
<S>                                                                    <C>             <C>             <C>             <C>   
Pro forma basic EPS:
     Continuing operations ........................................    $ 0.15          $ 0.06          $ 0.53          $ 0.24
     Discontinued operations ......................................        --              --              --           (2.09)
                                                                       ------          ------          ------          ------
     Net income (loss) per share ..................................    $ 0.15          $ 0.06          $ 0.53          $(1.85)
                                                                       ======          ======          ======          ======
Weighted average common and common equivalent shares                                                              
     outstanding (in thousands) ...................................     4,667           4,312           4,575           4,299
                                                                                                                  
Pro forma diluted EPS:                                                                                            
     Continuing operations ........................................    $ 0.13          $ 0.05          $ 0.48          $ 0.22
     Discontinued operations ......................................        --              --              --           (1.93)
                                                                       ------          ------          ------          ------
     Net income (loss) per share ..................................    $ 0.13          $ 0.05          $ 0.48          $(1.71)
                                                                       ======          ======          ======          ======
Weighted average common and common equivalent shares                                                              
     outstanding (in thousands) ...................................     5,268           4,730           5,127           4,657
</TABLE>



E.  COMMITMENTS:

      On September 30, 1997 the Company purchased approximately 360 acres of
land in Tilton, New Hampshire for $4,152,000. The site is intended to house a
new fulfillment center expected to be operational by early 1999. The estimated
cost of this new facility, including land, construction and equipment, ranges
from $33.0 to $37.0 million.


F. SUBSEQUENT EVENT:

      Subsequent to September 27, 1997, the Company sold 1,000,000 shares of
common stock in an underwritten public offering in which the price to the
public of the common stock was $13.50 per share. In addition, the Company has
been notified that the underwriters are exercising their over-allotment option
with respect to an additional 412,861 shares of common stock to be sold by the
Company. Also in connection with the public offering, 1,752,404 shares of the
Company's common stock were sold by selling stockholders. The Company will not
receive any of the net proceeds from the sale of shares by the selling
stockholders.

                                       8
<PAGE>   9



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

      RESULTS OF OPERATIONS

           Overview

           Net income increased 176.4% to $0.7 million for the three months
      ended September 27, 1997 ("third quarter 1997") as compared to $0.3
      million for the three months ended September 28, 1996 ("third quarter
      1996"). Net income per share increased 160.0% to $0.13 per share for third
      quarter 1997 as compared to $0.05 per share for third quarter 1996. Third
      quarter 1997 marked the fifth consecutive quarter of profit improvement as
      compared to the comparable quarter of the prior year. The Company
      attributes its profit improvement to strong customer response to its
      continuing focus on creative presentation, merchandise differentiation and
      brand building. The Company's J. Jill concept performed particularly well
      during the three months and nine months ended September 27, 1997.

           The following table sets forth the Company's consolidated statements
      of operations as a percentage of net sales and certain selected operating
      data:

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                            ----------------------          ----------------------
            
                                                                            SEPT. 27,    SEPT. 28,          SEPT. 27,    SEPT. 28,
                                                                              1997         1996               1997         1996
                                                                            ---------    ---------          ---------    ---------
            <S>                                                              <C>           <C>               <C>          <C>   
            CONSOLIDATED STATEMENT OF OPERATIONS:                                                                       
             Net sales....................................................    100.0%       100.0%             100.0%       100.0%
            Costs and expenses:                                                                                         
                 Product..................................................     44.2         44.2               44.2         43.4
                 Operations...............................................     20.0         16.1               18.6         16.8
                 Selling..................................................     23.6         27.7               24.2         28.6
                 General and administrative...............................      8.6         10.3                8.4          8.9
                 Interest, net............................................       --          0.4                0.1          0.4
                                                                             ------        -----             ------       ------
            Income from continuing operations before income taxes.........      3.6          1.3                4.5          1.9
            Provision for income taxes....................................      1.4          0.1                1.8          0.2
                                                                             ------        -----             ------       ------
            Income from continuing operations.............................      2.2          1.2                2.7          1.7
            Loss from discontinued operations.............................      --            --                --         (14.5)
                                                                             ------        -----             ------       ------
            Net income (loss).............................................      2.2%         1.2%               2.7%       (12.8)%
                                                                             ======        =====             ======       ======
            SELECTED OPERATING DATA (IN THOUSANDS):                                                                     
            Catalog circulation (1)                                          10,900        8,700             32,300       28,100
            Active customers (2)                                                794          639                794          639
</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 customers" means
           customers who have made a purchase from the Company within the
           previous 24 months.

      COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 27, 1997 WITH THE THREE
      MONTHS ENDED SEPTEMBER 28, 1996

           Net Sales

           During third quarter 1997 net sales increased by $11.1 million, or
      54.1%, to $31.6 million from $20.5 million during third quarter 1996.
      Catalog circulation increased by 25.3% to 10.9 million during third
      quarter 1997 from 8.7 million during third quarter 1996. The net sales and
      catalog circulation increases were primarily the result of significant net
      sales and circulation growth in the Company's J. Jill concept. During 1996
      the Company merged its The Very Thing! concept into its Nicole Summers
      concept. Circulation, and to a lesser degree, net sales for the Nicole
      Summers concept decreased during third quarter 1997 compared to combined
      circulation and net sales for the Nicole Summers and The Very Thing!
      concepts during third quarter 1996. The number of active customers grew to
      794,000 at September 27, 1997 from 639,000 at September 28, 1996, an
      increase of 24.3%.


                                        9

<PAGE>   10



           Product

           During third quarter 1997 product costs increased by $4.9 million, or
      53.9%, to $14.0 million from $9.1 million during third quarter 1996. As a
      percentage of net sales, product costs remained unchanged at 44.2% during
      both three month periods.

           Operations

           During third quarter 1997 operating expenses increased by $3.0
      million, or 92.0%, to $6.3 million from $3.3 million during third quarter
      1996. As a percentage of net sales, operating expenses increased to 20.0%
      during third quarter 1997 from 16.1% during third quarter 1996. This
      increase in operating expenses as a percentage of net sales was caused in
      part by increased use of the Company's third party call center and
      increased order processing and order fulfillment costs associated with the
      operation of multiple fulfillment centers during third quarter 1997 as
      compared to third quarter 1996. In addition, the operation of the
      Company's Meredith, New Hampshire fulfillment center at or near capacity
      during third quarter 1997 also contributed to the increase in operating
      expenses as a percentage of net sales. The Company anticipates that these
      trends will continue at least until early 1999, when the Company's planned
      new fulfillment center in Tilton, New Hampshire is scheduled to be fully
      operational.

           Selling

           During third quarter 1997 selling expenses increased by $1.8 million,
      or 31.3%, to $7.5 million from $5.7 million for third quarter 1996. As a
      percentage of net sales, selling expenses decreased to 23.6% during third
      quarter 1997 from 27.7% during third quarter 1996. The decrease in selling
      expenses as a percentage of net sales during third quarter 1997 was
      primarily the result of a more selective circulation strategy, a
      curtailing of unproductive cross-mailings to existing customers and the
      merger of the Company's The Very Thing! concept into its Nicole Summers
      concept in 1996. The Company does not expect further decreases in selling
      expenses as a percentage of net sales.

           General and Administrative

           During third quarter 1997 general and administrative expenses
      increased by $0.6 million, or 28.7%, to $2.7 million from $2.1 million
      during third quarter 1996. This increase is primarily attributable to
      increased management infrastructure, increased outside consulting fees and
      increased depreciation and occupancy costs. As a percentage of net sales,
      general and administrative expenses decreased to 8.6% during third quarter
      1997 from 10.3% during third quarter 1996.

      COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 27, 1997 WITH THE NINE 
      MONTHS ENDED SEPTEMBER 28, 1996

           Net Sales

           During the nine months ended September 27, 1997 net sales increased
      by $27.2 million, or 44.0%, to $89.1 million from $61.9 million during the
      nine months ended September 28, 1996. Catalog circulation increased by
      14.9% to 32.3 million during the nine months ended September 27, 1997 from
      28.1 million during the nine months ended September 28, 1996. The net
      sales and catalog circulation increases were primarily the result of
      significant net sales and circulation growth in the Company's J. Jill
      concept. During 1996 the Company merged its The Very Thing! concept into
      its Nicole Summers concept. Circulation, and to a slight degree, net sales
      for the Nicole Summers concept decreased during the nine months ended
      September 27, 1997 compared to combined circulation and net sales for the
      Nicole Summers and The Very Thing! concepts during the nine months ended
      September 28, 1996.

           Product

           During the nine months ended September 27, 1997 product costs
      increased by $12.5 million, or 46.7%, to $39.4 million from $26.9 million
      during the nine months ended September 28, 1996. As a percentage of net
      sales, product costs increased to 44.2% during the nine months ended
      September 27, 1997 from 43.4% during the nine months ended September 28,
      1996. This increase in product costs as a percentage of net sales was
      primarily attributable to increased promotional activity, as the Company
      introduced a new edition of its Nicole Summers catalog in 1997 which was
      designed to compete directly with value priced retail store offerings.



                                       10

<PAGE>   11



           Operations

           During the nine months ended September 27, 1997 operating expenses
      increased by $6.2 million, or 59.3%, to $16.5 million from $10.4 million
      during the nine months ended September 28, 1996. As a percentage of net
      sales, operating expenses increased to 18.6% during the nine months ended
      September 27, 1997 from 16.8% during the nine months ended September 28,
      1996. This increase in operating expenses as a percentage of net sales was
      caused in part by higher than anticipated demand levels for the Company's
      products, which resulted in increased use of the Company's third party
      call center and certain order processing and order fulfillment
      inefficiencies. In addition, the operation of the Company's Meredith, New
      Hampshire fulfillment center at or near capacity during the nine month
      period and the operation of multiple fulfillment centers during third
      quarter 1997 also contributed to the increase in operating expenses as a
      percentage of net sales.

           Selling

           During the nine months ended September 27, 1997 selling expenses
      increased by $3.9 million, or 22.2%, to $21.6 million from $17.7 million
      during the nine months ended September 28, 1996. As a percentage of net
      sales, selling expenses decreased to 24.2% during the nine months ended
      September 27, 1997 from 28.6% during the nine months ended September 28,
      1996. The decrease in selling expenses as a percentage of net sales during
      the nine months ended September 27, 1997 was primarily the result of a
      more selective circulation strategy, a curtailing of unproductive
      cross-mailings to existing customers and the merger of the Company's The
      Very Thing! concept into its Nicole Summers concept in 1996.

           General and Administrative

           During the nine months ended September 27, 1997 general and
      administrative expenses increased by $1.9 million, or 35.3%, to $7.5
      million from $5.5 million during the nine months ended September 28, 1996.
      This increase is primarily attributable to increased management
      infrastructure, increased outside consulting fees and increased
      depreciation and occupancy costs. As a percentage of net sales, general
      and administrative expenses decreased to 8.4% during the nine months ended
      September 27, 1997 from 8.9% for the nine months ended September 28, 1996.

      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 ("NOLs").
      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 associated tax benefit was
      recognized as income was earned, resulting in a significantly lower
      effective tax rate for all periods reported prior to December 1996.

           In December 1996, the Company performed a detailed analysis of the
      future taxable income levels required for the Company to fully realize the
      benefit of its net deferred tax assets. This analysis considered several
      factors, including the historical taxable income trend since fiscal 1993,
      exclusive of a taxable loss generated in fiscal 1996 by the Company's
      discontinued Carroll Reed segment, management's demonstrated ability to
      increase the Company's active customer database and the implementation of
      the Company's new strategic business initiatives. Based on this analysis,
      the Company 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
      $10.6 million at December 28, 1996 in its entirety. No assurance can be
      given, however, that the Company will achieve taxable income sufficient to
      realize the full benefit if its deferred tax assets.

           Because, for financial statement purposes, the benefit associated
      with the Company's deferred tax assets has been fully realized, the
      Company's effective tax 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 in fiscal 1997 than in
      the prior year. Cash payments for income taxes continue to be reduced by
      available NOLs, which results in cash payments which are significantly
      less than the income tax provision recorded for financial statement
      purposes during fiscal 1997.



                                       11
<PAGE>   12

      DISCONTINUED OPERATIONS

           On May 20, 1996, the Company announced its plan to divest its Carroll
      Reed segment due to the incompatibility of the customer base and product
      line of this segment with those of its other 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 $8.5 million for the loss on
      disposal of discontinued operations, consisting of $5.3 million related to
      the write-off of the remaining unamortized intangible assets and
      $3.2 million for expected losses during the phase-out period. The results
      of the Carroll Reed operations through May 20, 1996 have been classified
      as loss from discontinued operations in the accompanying consolidated
      statement of operations for the nine months ended September 28, 1996.
      Since May 20, 1996, the results of this discontinued operation have been
      charged to the liability from expected losses established in connection
      with the divestiture and have had no impact on the Company's operating
      results. The Company has completed the phase-out of its Carroll Reed
      segment and has utilized its reserve for expected losses.

      LIQUIDITY AND CAPITAL RESOURCES

           During the nine months ended September 27, 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.

           Pursuant to the Company's loan agreement with a commercial bank, the
      Company's credit facilities at September 27, 1997 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) a $6.0 million revolving line of credit
      (the "Revolver"); and (iv) a $2.5 million line for the issuance of
      commercial letters of credit (the "Letter of Credit Line"). All of the
      credit facilities under the loan agreement are collateralized by a first
      lien mortgage on the Company's operations and fulfillment center in
      Meredith, New Hampshire and a security interest in substantially all
      assets of the Company other than its marketable securities. The Term Loan
      is also collateralized by the Company's marketable securities. The terms
      of the Company's credit facilities contain various lending conditions and
      covenants, including restrictions on permitted liens and required
      compliance with certain financial coverage ratios.

           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 5, 1997 through its maturity on June 1, 2002. The Term Loan
      provides for several interest rate options. At September 27, 1997 the Term
      Loan bore interest at 7.22% per annum. Outstanding letters of credit at
      September 27, 1997 totaled approximately $1.2 million.

           Subsequent to September 27, 1997 the Company and its bank negotiated
      an amendment to the Company's credit facilities that, among other things,
      increased the aggregate principal availability thereunder from $13.8
      million to $18.1 million, included the Company's recently purchased land
      in Tilton, New Hampshire as collateral for all borrowings thereunder and
      combined the Revolver and Letter of Credit Line into a single $8.5 million
      facility (the "New Revolver"). The New 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 New Revolver commitment. The increase in aggregate principal
      availability was used to fund a $4.3 million bridge loan (the "Bridge
      Loan") that bears interest at 7.25% per annum and expires on
      February 28, 1998. The Company expects to negotiate a construction loan to
      finance some of the cost of constructing the Company's new Tilton, New
      Hampshire facility. That construction loan would replace the Bridge Loan.

           Subsequent to September 27, 1997, the Company sold 1,000,000 shares
      of common stock in an underwritten public offering in which the price to
      the public of the common stock was $13.50 per share. In addition, the
      Company has been notified that the underwriters are exercising their
      over-allotment option with respect to an additional 412,861 shares of
      common stock to be sold by the Company. Also in connection with the public
      offering, 1,752,404 shares of the Company's common stock were sold by
      selling stockholders. The Company will not receive any of the net proceeds
      from the sale of shares by the selling stockholders.

           Cash used in investing activities was $2.0 million during the nine
      months ended September 27, 1997, and $1.9 million during the nine months
      ended September 28, 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.


                                       12

<PAGE>   13



           Inventory levels at September 27, 1997 were 81.4% higher than at
      September 28, 1996. Inventory balances have increased compared to last
      year due to the growth in the business and anticipated future growth.
      Prepaid catalog expenses at September 27, 1997 were 53.5% higher than at
      September 28, 1996. This increase is primarily attributable to higher
      circulation levels this year versus last year.

           On September 30, 1997, the Company purchased approximately 360 acres
      of land in Tilton, New Hampshire for approximately $4.2 million. The site
      is intended to house a new fulfillment center expected to be operational
      by early 1999. The estimated cost of this new facility, including land,
      construction and equipment ranges from $33.0 to $37.0 million. The Company
      intends to finance the cost of the fulfillment center with a portion of
      the net proceeds received 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 or government sponsored financing. The Company is also in the
      process of upgrading its information systems, including implementing new
      order management and warehouse management systems. Total expenditures for
      this purpose are estimated at approximately $3.0 million of which
      approximately $0.9 million had been spent as of September 27, 1997.

           The net proceeds of the Company's recently completed public offering,
      the Company's existing credit facilities and cash flows from operations
      are expected to be sufficient to provide the capital resources necessary
      to support the Company's capital and operating needs (not including the
      new fulfillment center) for at least the next twelve months.

      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 D to the accompanying consolidated financial statements.

      FORWARD-LOOKING STATEMENTS

           The above discussion contains forward-looking statement within the
      meaning of Section 27A of the Securities Act of 1933, as amended and
      Section 21E of the Securities Exchange Act of 1934, as amended which
      involve 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 "believe,"
      "anticipates," "plans," "expects" and similar expressions are intended to
      identify forward-looking statements. The Company's actual results may
      differ significantly from the results discussed in the forward-looking
      statements. Factors that might cause such a difference include, but are
      not limited to 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.



                                       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 Amended and Restated Loan Agreement dated October 31, 1997 between
           the Company and Citizens Bank of Massachusetts

      10.2 Bridge Note dated October 31, 1997 between the Company and Citizens
           Bank of Massachusetts

      10.3 Mortgage (Bridge Mortgage) dated October 31, 1997 between the Company
           and Citizens Bank of Massachusetts

      10.4 First Amendment to Security Agreement dated October 31, 1997 between
           the Company and Citizens Bank of Massachusetts

      10.5 First Amendment to Mortgage dated October 31, 1997 between the
           Company and Citizens Bank of Massachusetts

      10.6 Replacement Revolving Note dated October 31, 1997 between the Company
           and Citizens Bank of Massachusetts

      10.7 Employment Letter Agreement between the Company and Kevin E. Burns

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
September 27, 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:  November 10, 1997       By:    /s/ Olga L. Conley
                                          --------------------------------------
                                      Olga L. Conley
                                      Authorized Officer
                                      Vice President - Finance, Chief Financial 
                                      Officer and Treasurer (Principal Financial
                                      Officer)


                                       15

<PAGE>   16


                       DM MANAGEMENT COMPANY & SUBSIDIARY

                          QUARTERLY REPORT ON FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 27, 1997


                                  EXHIBIT INDEX


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

  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)

  10.1            Amended and Restated Loan Agreement dated October 31, 1997
                  between the Company and Citizens Bank of Massachusetts

  10.2            Bridge Note dated October 31, 1997 between the Company and
                  Citizens Bank of Massachusetts

  10.3            Mortgage (Bridge Mortgage) dated October 31, 1997 between the
                  Company and Citizens Bank of Massachusetts

  10.4            First Amendment to Security Agreement dated October 31, 1997
                  between the Company and Citizens Bank of Massachusetts

  10.5            First Amendment to Mortgage dated October 31, 1997 between the
                  Company and Citizens Bank of Massachusetts

  10.6            Replacement Revolving Note dated October 31, 1997 between the
                  Company and Citizens Bank of Massachusetts

  10.7            Employment Letter Agreement between the Company and Kevin E.
                  Burns

  11.1            Statement re: computation of per share earnings

  27.1            Financial Data Schedule




                                       16