<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                                   (Mark One)
(X) Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the fiscal year ended January 30, 1999

( ) Transition report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934 for the transition period
                         from                to
                             ----------------  -----------------

                        Commission file number     333-32825
                                                  ----------------

                               SFW HOLDING CORP.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                     52-2014682
----------------------------------          -----------------------------------
   (State or other jurisdiction of                 (I.R.S. Employer
  incorporation or organization)                  Identification No.)


3300 75th Ave. Landover, Maryland                      20785
----------------------------------          -----------------------------------
   (Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code      (301) 226-1200
                                                   ----------------------------
 Securities registered pursuant to Section 12(b) of the Act:       NONE
                                                              ---------------
 Securities registered pursuant to Section 12(g) of the Act:       NONE
                                                              ---------------

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

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

At April 30, 1999, the registrant had 1,000 shares of Common Stock.  The common
stock of SFW Holding Corp. is not publicly traded.

The registrant meets the conditions as set forth in General Instructions I(1)(a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.

The exhibit index begins at page 52 of this Form 10-K.


<PAGE>   2

                               Table of Contents

                                     PART I

                                                                Page

Item 1.     Business                                               3

Item 2.     Properties                                             9

Item 3.     Legal Proceedings                                     11

Item 4.     Submission of Matters to a Vote of

            Security Holders                                      11

                                    PART II

Item 5.     Market for the Registrant's Common

            Equity and Related Stockholder Matters                11

Item 6.     Selected Financial Data                               11

Item 7.     Management's Discussion and Analysis of
            Financial Condition and Results of
            Operations                                            12

Item 7A.    Quantitative and Qualitative Disclosures
            about Market Risk                                     19

Item 8.     Financial Statements and Supplementary Data           20

Item 9.     Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure                42

                                    PART III

Item 10.    Directors, Executive Officers, Promoter and
            Control Person of the Registrant                      43

Item 11.    Executive Compensation                                43

Item 12.    Security Ownership of Certain Beneficial
            Owners and Management                                 43

Item 13.    Certain Relationships and Related Transactions        43

                                    PART IV

Item 14.    Exhibits, Financial Statement Schedules
            and Reports on Form 8-K                               44


                                       2

<PAGE>   3


                                     PART I

Forward Looking Statements

Statements in this report that are not historical in nature, including
references to beliefs, anticipations or expectations, are "forward-looking"
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. Such
statements are subject to a wide variety of risks and uncertainties that could
cause actual results to differ materially from those projected including,
without limitation, the ability of the Company (as defined below) to open new
stores, the availability of capital to fund operations, the effect of regional
economic conditions, the effect of increased competition in the markets in
which the Company operates and other risks described from time to time in the
Company's filings with the Securities and Exchange Commission. The Company
undertakes no obligation and does not intend to update, revise or otherwise
publicly release any revisions to these forward-looking statements, which
revisions may be made to reflect any future events or circumstances, other than
through its regular quarterly and annual reports filed with the Securities and
Exchange Commission (the "SEC").

Item 1.  Business

SFW Holding Corp. ("SFW Holding" or the "Company") was incorporated in Delaware
in January 1997 and is a wholly-owned subsidiary of Dart Group Corporation
("Dart").  SFW Holding's sole asset is its ownership of 100% of the outstanding
common stock of Shoppers Food Warehouse Corp. ("Shoppers").  The principal
executive offices of Shoppers are located at 4600 Forbes Blvd., Lanham,
Maryland 20706.  The telephone number of Shoppers is 301-306-8600.  The common
stock of SFW Holding and Shoppers is not publicly traded.

Acquisition of Dart Group Corporation by Richfood Holdings, Inc.

On May 18, 1998, a wholly-owned subsidiary of Richfood Holdings, Inc.
("Richfood") acquired all of the outstanding shares of Dart, which owns 100% of
the outstanding common stock of the Company, for approximately $201 million
(the "Dart Acquisition"). In connection with the Dart Acquisition, Richfood
caused its subsidiary to merge with and into Dart (the "Merger") in a
transaction in which Dart became a wholly-owned subsidiary of Richfood. As a
result of the Merger, Richfood indirectly owns 100% of the outstanding common
stock of the Company and Shoppers.

Richfood accounted for the Dart Acquisition using the purchase method of
accounting, and accordingly, a new accounting basis began as of May 18, 1998
and the assets and liabilities of the Company and Shoppers were restated to
reflect their estimated fair market values as of that date. The excess of the
Dart Acquisition purchase price over net assets acquired (goodwill) related to
the acquisition has been pushed-down to Shoppers. This goodwill of
approximately $317.2 million is based on a preliminary allocation of the
purchase price and is being amortized on a straight line basis over 40 years.

Richfood is operating Shoppers as a distinct unit within its retail division
and does not presently plan to make any material changes to Shoppers' strategic
focus or operational format.


                                       3

<PAGE>   4



Item 1.  Business (Continued)

Acquisition of the Company by Dart Group Corporation

In June 1988, Dart acquired an initial 50% interest of Shoppers. In January
1997, Dart contributed its shares of Shoppers outstanding common stock to SFW
Holding for 100% of the common stock of SFW Holding. On February 6, 1997, SFW
Holding acquired the remaining 50% interest in Shoppers for $210 million (the
"Shoppers Acquisition"). SFW Holding financed the Shoppers Acquisition through
the application of $137.2 million in net proceeds raised from an offering of
Increasing Rate Senior Notes due 2000 (the "Increasing Rate Notes") of SFW
Acquisition Corp., a newly created wholly-owned indirect subsidiary of Dart,
and $72.8 million of bridge financing provided by a bank. Immediately after the
Shoppers Acquisition, SFW Acquisition Corp. merged into Shoppers (with Shoppers
becoming the obligor and SFW Holding becoming guarantor on the Increasing Rate
Notes) and Shoppers repaid the bridge financing from its existing cash and the
liquidation of certain short-term investments. In June 1997, Shoppers
refinanced the Increasing Rate Notes with $200 million aggregate principal
amount 9:% Senior Notes due 2004 (the "Senior Notes"). The net proceeds from
the Senior Notes were $193.5 million (after fees and expenses of approximately
$6.5 million) of which $143.5 million was used to repay the Increasing Rate
Notes (including interest).

Operations

Shoppers is a leading supermarket operator in Greater Washington, D.C. (as
defined below), operating 38 stores under the "Shoppers Food Warehouse" and
"Shoppers Club" names, that targets the price-conscious segment of its market
area in densely populated suburban areas. Shoppers operates warehouse-style,
price impact supermarkets that are designed to offer the lowest overall prices
in its market area by passing on to the consumer savings achieved through labor
efficiencies and lower overhead associated with the warehouse format, while
providing the product selection and quality associated with a conventional
supermarket format. Shoppers' store equipment and facilities are generally in
good condition. Shoppers stores are generally open 18 hours per day seven days
a week (allowing for shelf restocking while the stores are closed) and offer a
full range of fresh produce, fresh baked goods, fresh meats and seafood, frozen
foods, traditional grocery items and certain non-food items such as health and
beauty aids, cookware, greeting cards, magazines and seasonal items. Shoppers'
stores also have service delicatessens, with some stores offering hot and cold
prepared food and self-service soup and salad bars.

The Company's stores offer products at prices that are generally below those of
its primary supermarket competitors. Customers bag their own groceries and
merchandise is presented on warehouse-style racks in full cartons, reducing
labor-intensive unpacking. In-store operations are also designed to allow
customers to perform certain labor-intensive services usually offered in
conventional supermarkets. For example, the Company's stores generally do not
provide service staff to support the bakery and floral departments or the meat
and seafood refrigerated cases, although the stores provide service in these
departments at the request of customers.

The Company's stores generally are constructed with high ceilings to
accommodate warehouse racking with overhead pallet storage. Wide aisles
accommodate forklifts and, compared to conventional supermarkets, a higher
percentage of

                                       4

<PAGE>   5


Item 1.  Business (Continued)

total store square footage is devoted to retail selling spaces because the top
of the warehouse-style grocery racks on the sales floor are used to store
inventory, which reduces the need for large backroom storage and restocking
trips.

Notwithstanding the "warehouse" name, physical features and low-price
reputation, Shoppers' stores have more in common with conventional supermarket
chains than with so-called "warehouse clubs." No membership fee is charged at
Shoppers stores, which offer a selection of popular-sized national brands and
private label products, as well as high quality produce, meat and seafood. The
product offerings are similar to those of conventional supermarkets with
slightly more emphasis on larger package sizes and with less emphasis on
extensive brand and size selection. All 38 of the Company's supermarkets have a
delicatessen, a bakery and a floral department and 21 stores have a beer and
wine department.

While similar in most respects to conventional supermarket operators, Shoppers
distinguishes itself by providing low-price leadership while still emphasizing
quality. Shoppers does this by offering an unusual combination of higher-end
specialty departments with self-service and discount price features. In
addition, unlike traditional supermarkets, Shoppers stores offer a greater
selection of "club size" products, along with popular-sized brands. Through
this approach, Shoppers has established a unique niche among supermarket
operators in Greater Washington, D.C.

The Company's stores range in size from approximately 20,000 to 77,000 total
square feet and average approximately 47,000 square feet. Shoppers' stores can
be categorized by size as follows: (i) 10 stores smaller than 40,000 square
feet; (ii) 12 stores ranging from 40,000 to 50,000 square feet; and (iii) 16
stores between 50,000 and 77,000 square feet. The stores in the first category
generally are older stores located in densely populated areas in which little
or no supermarket expansion is expected due to the limited availability of real
estate locations. Despite their age and size, as a group, these stores
generally continue to perform well in terms of sales per square foot and
profitability. The next size category represents stores that more closely
resemble the store sizes operated by conventional supermarket competitors in
the local area. Finally, the category representing the largest size stores
includes the nine "Shoppers Club" supermarkets (averaging approximately 67,900
total square feet per store). These larger size supermarkets generally have
more space devoted to specialty departments and offer more "club pack" size
products.

Shoppers is the largest supermarket chain targeting the price-conscious segment
in Greater Washington, D.C. The two primary competitors of Shoppers are Giant
Food, Inc. ("Giant") and Safeway Inc. ("Safeway"), both of which operate in the
higher-service, higher-price segment. Overall, Shoppers has the third largest
market share in Greater Washington, D.C. "Greater Washington, D.C." includes
Washington, D.C.; Calvert, Charles, Frederick, Montgomery and Prince Georges
counties in Maryland; Arlington, Fairfax, Loudoun, Prince William and Stafford
counties in Virginia; and the independent cities of Alexandria, Fairfax and
Falls Church in Virginia. Shoppers does not, however, operate any stores in the
city of Washington, D.C.

                                       5

<PAGE>   6

Item 1.  Business (Continued)

Store Expansion and Remodeling

Shoppers has plans to open large new stores and upgrade existing stores.
Shoppers opened four new stores since July 1997 and has signed a lease to open
one new store (between 65,000 and 75,000 square feet) during the fiscal year
ending January 29, 2000 ("fiscal 2000"). Shoppers is currently considering
expanding or remodeling at least 17 stores during fiscal 2000. Of its existing
38 stores, 28 are larger than 40,000 square feet, and all but one of the
Company's stores were opened, remodeled or expanded during the last ten years.
The Company believes that its existing supermarkets generally have
well-established locations with favorable lease terms (including multiple
options), are in good condition and require only routine maintenance.

The following chart sets forth certain information concerning Shoppers stores
during the past five fiscal years:

<TABLE>
<CAPTION>
                                                         Fiscal Year
                                                  ----------------------------
                                                  1995  1996  1997  1998  1999
                                                  ----  ----  ----  ----  ----
<S>                                               <C>   <C>   <C>   <C>   <C>
Number of Stores at Beginning of Period            35    33    34    34    37
New Stores Opened                                   0     1     0     3     1
Stores Closed                                       2     0     0     0     0
                                                   --    --    --    --    --
Stores at End of Period                            33    34    34    37    38
Remodeled/Expanded                                  1     0     2     0     2
</TABLE>

During the 52 weeks ended January 30, 1999 ("fiscal 1999"), Shoppers opened a
67,590 square foot store in College Park, Maryland.

Product Selection

The Company believes that in recent years consumers have shown an increasing
preference for food stores that offer not only the wide variety of food and
non-food items carried by conventional supermarkets, but also an expanded
assortment of high-quality specialty food items and fresh produce. To respond
to this trend, Shoppers offers a complete line of produce, fresh baked goods,
freshly packaged meat, seafood products and floral assortments and provides
service in these departments at the customer's request. This strategy provides
consumers with a wider selection of higher quality products and convenience
foods, while shifting its sales mix toward higher gross margin products.

Shoppers' largest supermarkets carry over 25,000 Stock Keeping Units ("SKUs").
Its merchandising program is designed to offer customers a wide selection of
products at prices that are generally below those of its primary supermarket
competitors. Shoppers accomplishes this by carrying slightly fewer items than
its local supermarket competitors, primarily through pursuing less duplication
of products in smaller sizes. This program also includes a critical assessment
of existing store layouts, shelving and product mix. The Company monitors SKUs
to identify slow-moving products that may be replaced with new products.

Shoppers stores carry a variety of grocery and general merchandise under private
label names, including "Richfood" and "Shoppers Food Warehouse," which currently
account for approximately 10% of its sales. Private label products are of a
quality generally comparable to that of national brands, at significantly lower
prices, while Shoppers' gross margins on private label products are generally

                                       6

<PAGE>   7

Item 1.  Business (Continued)

higher than on national brands.

Purchasing, Warehousing and Distribution

Shoppers purchases approximately 75% of its inventory from subsidiaries of
Richfood. Because Shoppers' stores receive most of their deliveries from
Richfood subsidiaries almost daily, Shoppers maintains no warehouse storage
space. Richfood's large volume purchasing results in significant cost savings
to Shoppers.

Shoppers also purchases merchandise sold in its supermarkets, in particular,
beverages and snack products, from sources other than Richfood.

Advertising and Promotion

Shoppers uses a broad-based advertising program to emphasize its "Low Price"
image. Over two million 12 page, four color circulars are printed and
distributed weekly in the Washington Post to subscribers, and to nonsubscribers
via the "Post-Plus" program, which insures that the circulars are placed in
every home in the Greater Washington, D.C. Market. The "Low price" image is
reinforced with a television and radio campaign supported by vendors' and
Shoppers' funds.

Media broadcasts support the Bonus Saving Program, in which manufacturers'
allowances are passed on to customers in the form of lower priced products.
Broadcasts also support Shoppers Discounted Program, whereby pre-priced items
are discounted 10% to 40% for the customer. Extensive in-store point of
purchase signs are located throughout the stores to communicate Shoppers low
price image.

Competition

The supermarket industry is highly competitive and characterized by narrow
profit margins. Shoppers' competitors include national, regional and local
supermarket chains, independent grocery stores, specialty food stores,
warehouse club stores, drug stores and convenience stores. Supermarket chains
generally compete on the basis of location, quality of products, service,
price, product variety and store condition. Shoppers competes by providing its
customers with exceptional value by offering quality produce and fresh foods,
self-service specialty departments, and a selection of national brand groceries
and private label goods, all at competitive prices. Shoppers monitors the
prices offered by its competitors on a weekly basis and uses a computerized
price management system to verify pricing positions. The Company's ability to
remain competitive in its markets depends in part on its ability to remodel and
update its stores in response to remodelings and new store openings by its
competitors.

The number and type of competitors vary by location. Shoppers' two principal
competitors are conventional supermarket chains, Giant and Safeway, which have
market shares in Greater Washington, D.C. of approximately 44% and 26%,
respectively. The Company believes that Shoppers' market share of approximately
13% exceeds the next highest competitor by almost four times. However, Shoppers
believes that it will face increased competition in the future from other
supermarket chains and intends to compete aggressively against existing and new

                                       7

<PAGE>   8


Item 1.  Business (Continued)

competition.

Employees

As of January 30, 1999, Shoppers employed approximately 4,700 people, of whom
approximately 1,400 were full-time. Approximately 4,300 employees were covered
by collective bargaining agreements with various locals of two unions. Shoppers
has an agreement with United Food and Commercial Workers, Local 400, which will
expire July 1, 2000 and covers approximately 4,000 retail clerks and meat
cutters, and an agreement with United Food and Commercial Workers, Local 27,
which will expire September 30, 2001 and covers approximately 300 retail clerks
and meat cutters.

Trade Names, Service Marks and Trademarks

Shoppers uses a variety of trade names, service marks and trademarks. Except
for "Shoppers," "SFW," "Shoppers Food Warehouse" and "Shoppers Club," Shoppers
does not believe any of such trade names, service marks or trademarks are
material to its business. Shoppers presently has federal registrations of the
"Shoppers Food Warehouse" and "Colossal Donuts" trademarks. It has federal
registration of "Shoppers Club" as a service mark and is seeking federal
registration of it as a trademark. Shoppers also has federally registered
"Shoppers," "Shoppers Food Warehouse" and "SFW" as service marks and has also
registered the "Shoppers Food Warehouse" and "SFW" designs.

Government Regulation

Shoppers is subject to regulation by a variety of governmental agencies,
including, but not limited to, the U.S. Food and Drug Administration, the U.S.
Department of Agriculture and state and local health departments and other
agencies, including those regulating the sale of beer and wine.

Environmental Matters

Shoppers is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous wastes, and (ii) impose
liability for the costs of cleaning up, and certain damages resulting from,
sites of past spills, disposals or other releases of hazardous materials.
Shoppers believes it conducts its operations in compliance with applicable
environmental laws. Shoppers has not incurred material capital expenditures for
environmental controls during the previous three years.


                                       8


<PAGE>   9

Item 2.  Properties

Shoppers has supermarkets in Virginia and Maryland, all of which are leased.
The following chart sets forth certain information regarding its stores by
size:

<TABLE>
<CAPTION>
                                                             Size
      Location                                        (gross sq. ft.)
      --------                                        ---------------
      <S>                                             <C>
      Alexandria, VA (Potomac Yards)(1)                     76,774
      Manassas, VA (Sulley Manor Drive)(1)                  75,864
      Fredericksburg, VA(1)                                 74,864
      Germantown, MD(1)                                     70,057
      Falls Church, VA(1)                                   68,974
      College Park, MD(1)                                   67,590
      Dale City, VA(1)                                      63,971
      Takoma Park, MD(1)                                    60,348
      Clinton, MD                                           54,200
      Alexandria, VA (Richmond Hwy)                         53,692
      Alexandria, VA (N. Kings Hwy)                         53,380
      Laurel, MD(1)                                         51,880
      Forestville, MD                                       51,828
      Olney, MD                                             51,000
      Fairfax, VA                                           50,750
      Leesburg, VA                                          50,101
      Landover, MD (Largo)                                  49,840
      Burke, VA                                             49,284
      Herndon, VA                                           48,424
      Manassas, VA (Shoppers Square)                        47,040
      Centreville, VA                                       47,002
      Lanham, MD                                            46,470
      Stafford, VA                                          43,895
      Franconia, VA                                         42,862
      Frederick, MD                                         42,500
      Sterling, VA                                          42,491
      Hyattsville, MD (Chillum)                             40,559
      Chantilly, VA                                         40,373
      Waldorf, MD                                           39,920
      Landover, MD (M.L. King)                              36,500
      New Carrolton, MD                                     35,760
      Coral Hills, MD                                       35,000
      Annapolis, MD                                         28,710
      Rockville, MD                                         26,770
      Colmar Manor, MD                                      25,336
      Annandale, VA                                         23,680
      Alexandria, VA (Little River Turnpike)                23,322
      Hyattsville, MD (Adelphi)                             20,329
</TABLE>

      ---------------------------
      (1) Shoppers Club supermarket.

Most of the Company's stores are operated under long-term leases that the
Company believes have favorable terms. The lease for one of the Company's
smallest stores was on a month-to-month basis, which was terminated in February
1999.

                                       9

<PAGE>   10

Item 2.     Properties (continued)

Shoppers leases an 86,000 square foot office building in Lanham, MD that serves
as its corporate offices. The lease commenced in 1990 and expires in 2010. The
Company subleases approximately 35,600 square feet of this office building to
unrelated third parties.


                                       10

<PAGE>   11


Item 3.     Legal Proceedings

In the ordinary course of its business, Shoppers is a party to various legal
actions that the Company believes are routine in nature and incidental to the
operation of its business. Shoppers believes that the outcome of the
proceedings to which Shoppers currently is a party will not have a material
adverse effect upon its business, financial condition and results of
operations.


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

         Information omitted in accordance with General Instruction I (2)(c).

                                    Part II


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

         The Common Stock of SFW Holding Corp. is not publicly traded.

Item 6.  Selected Financial Data

         Information omitted in accordance with General Instruction I(2)(a).


                                       11


<PAGE>   12


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

Outlook

Except for historical information, statements in this Management's Discussion
and Analysis of Financial Condition and Results of Operations are
"forward-looking" 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. Actual results may differ materially due to a variety of factors,
including Shoppers' ability to open new stores and the effect of regional
economic conditions. The Company undertakes no obligation and does not intend
to update, revise or otherwise publicly release any revisions to these
forward-looking statements that may be made to reflect future events or
circumstances, other than through its regular quarterly and annual reports
filed with the SEC.

Richfood operates Shoppers as a distinct unit within its retail division and
does not presently plan to make any material changes to Shoppers' strategic
focus or operational format.

Financial Condition

In connection with the Dart Acquisition, the portion of the Dart purchase price
allocated to Shoppers was pushed-down to the Company's financial statements. As
a result, Assets and Stockholder's Equity on the Company's Consolidated Balance
Sheet each increased by approximately $171.9 million.

Results of Operations

Reference to "fiscal 1999" means the 52 weeks ended January 30, 1999, "fiscal
1998" means the 52 weeks ended January 31, 1998 and "fiscal 1997" means the 52
weeks ended January 31, 1997.

Fiscal 1999 Compared with Fiscal 1998

Sales increased by $29.8 million, or 3.5%, from $855.8 million during fiscal
1998 to $885.6 million during fiscal 1999. The sales increase was primarily due
to additional sales associated with four new stores opened since July 1997
(including one store that opened in July 1998). Comparable store sales
decreased 6.0% during fiscal 1999, compared to the prior fiscal year. The
decrease in comparable store sales was primarily due to the new Shoppers'
stores drawing customers from existing Shoppers' stores and competitive market
conditions.

Gross profit increased by approximately $14.4 million (7.2%), from $199.2
million during fiscal 1998 to $213.6 million during fiscal 1999. Gross profit,
as a percentage of sales, increased to 24.1% during fiscal 1999 compared to
23.3% during fiscal 1998. The increase in gross profit was primarily due to the
reduced number of items with special discount pricing as well as an increase in
allowances received from vendors associated with the introduction of new
products.

Selling and administrative expenses increased by approximately $9.6 million
(6.0%), from $160.7 million during fiscal 1998 to $170.3 million during fiscal
1999. Selling and administrative expenses, as a percentage of sales, increased
from 18.8% during fiscal 1998 to 19.2% during fiscal 1999. The increase was


                                       12


<PAGE>   13

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

primarily attributable to higher advertising expenses and one-time promotional
expenses at certain locations.

Depreciation and amortization increased by $2.4 million from $11.1 million
during fiscal 1998 to $13.5 million during fiscal 1999. The increase was
primarily due to increased amortization of goodwill as a result of the Dart
Acquisition.

Operating income was $29.8 million for fiscal 1999 compared to $27.4 million
for the same period in the prior fiscal year. The increase was primarily due to
the increase in gross profit and was partially offset by the increased selling
and administrative expenses and amortization of goodwill.

Interest income increased approximately $0.6 million during fiscal 1999
compared to fiscal 1998 due to interest accrued on the loans to Dart and the
interest recorded on the note receivable from an affiliate of Dart (see Note 7
to the Consolidated Financial Statements).

Interest expense decreased approximately $2.6 million from $21.1 million during
fiscal 1998 to $18.5 million during fiscal 1999. The decrease was primarily the
result of a reduction in interest expense due to amortization of the adjustment
to market value of the Senior Notes.

The effective income tax rate for fiscal 1999 was 54.3% compared to 48.5% for
fiscal 1998. The increase was attributable to the increase in nondeductible
amortization of acquisition related goodwill as a result of the Dart
Acquisition in May 1998.

Net income increased by $3.4 million, from $3.7 million during fiscal 1998 to
$7.1 million during fiscal 1999. The increase was primarily attributable to the
inclusion of an extraordinary item comprised of the loss on the early
extinguishment of debt during fiscal 1998 and to the increase in operating
income during fiscal 1999.

Fiscal 1998 Compared with Fiscal 1997

Sales increased by $4.9 million, from $850.9 million during fiscal 1997 to
$855.8 million during fiscal 1998. The sales increases were due to three new
stores opened since July 1997. Comparable store sales decreased 4.5% during
fiscal 1998. The decrease in comparable store sales was primarily due to the
new stores drawing customers from existing stores and competitive market
conditions.

Gross profit increased by $8.3 million (4.3%), from $190.9 million during
fiscal 1997 to $199.2 million during fiscal 1998. Gross profit, as a percentage
of sales, increased to 23.3% during fiscal 1998 from 22.4% during fiscal 1997.
The increases were primarily due to a more proactive pricing strategy on
selected items, a reduction in the number of items that were offered at special
discounts on a weekly basis in stores, a higher allowance income achieved
through increased vendor participation and a reduction in the charge to
operations for LIFO, from $0.9 million during fiscal 1997 to $0.4 million
during fiscal 1998.


                                       13


<PAGE>   14

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

Selling and administrative expenses increased by $6.1 million (3.9%), from
$154.6 million during fiscal 1997 to $160.7 million during fiscal 1998. Selling
and administrative expenses, as a percentage of sales, increased from 18.2%
during fiscal 1997 to 18.8% during fiscal 1998. The increases were primarily
attributable to increased payroll costs associated with negotiated union rates
and to expenses associated with three new stores opened after July 1997.

Depreciation and amortization increased by $2.4 million from $8.7 million
during fiscal 1997 to $11.1 million during fiscal 1998. The increases were
primarily due to additional depreciation and amortization associated with
goodwill and lease rights, as well as with fixed assets purchased for three new
stores opened after July 1997, offset in part by assets becoming fully
depreciated in 1997. In connection with the Shoppers Acquisition, the Company
commenced using Dart's method of depreciating property and equipment on a
straight-line basis. Prior to the Shoppers Acquisition, the Company used
accelerated methods. The cumulative effect of this change in accounting
principle has been recorded in the financial statements for fiscal 1998.
Depreciation expense for fiscal 1997 would have been $0.6 million more using
the straight-line basis.

Operating income was $27.4 million for fiscal 1998 compared to $27.6 million
during the prior fiscal year. The decrease was primarily due to higher selling
and administrative expenses and increased depreciation and amortization and was
partially offset by the increase in gross profit.

Interest income decreased $2.4 million during fiscal 1998 compared to fiscal
1997 primarily due to a reduction of funds available for short-term investing
as a result of the repayment of the bridge financing associated with the
Shoppers Acquisition.

Interest expense increased approximately $19.4 million from $1.6 million during
fiscal 1997 to $21.1 million during fiscal 1998 as a result of interest paid on
the Increasing Rate Notes, interest accrued on the Senior Notes and the
amortization of financing costs.

The effective income tax rate for fiscal 1998 was 48.5% compared to 35.7% for
fiscal 1997. The increase was primarily attributable to nondeductible
amortization of acquisition related goodwill.

On June 26, 1997, the Company sold $200 million aggregate principal amount of
its 9.75% senior notes due 2004. On July 25, 1997, the proceeds were used to
repay $143.3 million (including approximately $3.3 million of accrued and
unpaid interest) of the existing Increasing Rate Notes and to pay $50.0 million
into an escrow account, which was used by Dart when it consummated a settlement
with certain of its shareholders. As a result of this transaction, $5.3
million, representing an unamortized portion of the financing costs incurred to
secure initial senior indebtedness, were expensed as an extraordinary item, net
of taxes of approximately $2.2 million.

Net income decreased by $16.9 million, from $20.6 million during fiscal 1997 to
$3.7 million during fiscal 1998. The decrease was primarily attributable to
increased interest expense associated with the Company's indebtedness and the
extraordinary item discussed above, offset by the cumulative effect of the

                                       14

<PAGE>   15

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

change in accounting principle.

Effects of Inflation

During the last three fiscal years, the rate of general inflation has been
relatively low and has not had a significant impact on Shoppers' net sales or
income from continuing operations.

Liquidity and Capital Resources

The Company's principal source of liquidity is expected to be its cash flow
from operations. It is anticipated that Shoppers' principal uses of liquidity
will be to provide working capital, finance capital expenditures and meet debt
service requirements.

During fiscal 1999, operating activities generated net cash of $9.1 million
compared to $16.6 million during the prior fiscal year. The decrease was
primarily due to shorter payment terms on inventory purchases from Richfood
compared to payment terms on trade accounts payable.

Investing activities used $5.9 million of Shoppers' cash during fiscal 1999
compared to providing $85.6 million during fiscal 1998. The change was
primarily due to the Company's disposition of its short-term investments during
fiscal 1998 in order to provide funds for the repayment of the Bridge Loan
associated with the Shoppers Acquisition. During fiscal 1999, cash was used
primarily for capital expenditures relating to one new store that opened in
July 1998, as well as routine expenditures for equipment, and was partially
offset by the net disposition of short-term investments. Shoppers estimates
that it will make total capital expenditures of approximately $22.5 million
during the 52 weeks ending January 29, 2000. Management expects that these
capital expenditures will be financed primarily through cash flow from
operations.

Financing activities used $0.6 million of the Company's cash during fiscal
1999, compared to using $111.9 million during fiscal 1998. The decrease was
primarily due to payments on the Bridge Loan, other financing costs and
acquisition costs associated with the Shoppers Acquisition during the prior
fiscal year (see Note 2 to the Consolidated Financial Statements).

Shoppers' current interest expense consists primarily of interest on the Senior
Notes and capital lease obligations. Interest on the Senior Notes is accrued
from the date of issuance and is payable semi-annually in arrears on each June
15 and December 15. The Senior Notes are effectively subordinated in right of
payment to all secured indebtedness of the Company and contain certain
restrictive covenants including, (i) limitation on restricted payments, (ii)
limitation on indebtedness, (iii) limitation on investments, loans and
advances, (iv) limitation on liens, (v) limitation on transactions with
affiliates, (vi) restriction on mergers, consolidations and transfers of
assets, (vii) limitation on lines of business, (viii) limitations on asset
sales and (ix) limitation on issuance and sale of capital stock of
subsidiaries. The amount of dividend payments that the Company can make to Dart
is also subject to certain restrictions.


                                       15

<PAGE>   16


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

The Company believes that cash flows from Shoppers' operations will be adequate
to meet its anticipated requirements for working capital, debt service and
capital expenditures.

Year 2000 Compliance

References herein to Richfood are based on information provided by Richfood to
the Company.

The "Year 2000" issue is the result of computer systems and software programs
using only two digits rather than four to define a year. As a result, computer
systems that have date--sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. Unless remedied, the Year 2000 issue
could result in system failures, miscalculations, and the inability to process
necessary transactions or engage in similar normal business activities. In
addition to computer systems and software, any equipment using embedded chips,
such as switchgear, controllers and telephone exchanges, could also be at risk.

As a result of the Dart Acquisition, the Company's computer systems and
software programs are being incorporated into Richfood's. Richfood has
developed, and has begun implementing, a strategic, long--term information
technology plan (the "Strategic Plan") to upgrade its core application systems.
Concurrently, Richfood has developed and is implementing a plan (the "Y2K
Plan") to ensure that its information systems are Year 2000 compliant. The Y2K
Plan focuses on the following three major areas:

      -     Information technology systems ("IT").

      -     Embedded technology and other systems ("Non-IT").

      -     Key third party relationships.

Based on the Strategic Plan and assessments conducted as part of the Y2K Plan,
Richfood determined that it would be necessary to modify or replace portions of
its software and certain hardware systems so that such systems will properly
recognize dates beyond December 31, 1999. Richfood presently believes that with
the modification or replacement of existing software and certain hardware
systems, the Year 2000 issue can be significantly mitigated. However, if such
modifications and replacements are not made, or are not completed in a timely
manner, the Year 2000 issue could have a material adverse impact on the
financial condition or results of operations of the Company.

Richfood's Y2K Plan, as it pertains to the Company, involves the following
three phases:

      -     Assessment -- locating, listing and prioritizing the specific
            technology that is potentially subject to Year 2000 issues,
            assessing the actual exposure of such technology to the Year 2000
            issue, and planning/scheduling the allocation of internal and third
            party resources for the remediation effort.

      -     Remediation/Testing of non-compliant systems - selecting and



                                       16

<PAGE>   17

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


            executing the method necessary to resolve the Year 2000 issues that
            were identified, including replacement, upgrade, repair or
            abandonment and testing the remediated or converted technology to
            determine the efficacy of the resolutions.

      -     Implementation- placing remediated technology into operation.

The assessment phase has been completed with respect to IT and Non--IT systems
that Richfood believes could be adversely affected by the Year 2000 issue. The
assessment indicated that many of the Company's significant information systems
could be adversely affected, particularly the general ledger, human resources,
payroll, and point of sale systems. Non-IT systems, including telephones,
loss-prevention and food production systems, are also being validated; however,
the Company believes that non-compliance of the Non-IT systems does not pose a
significant risk to the Company's financial condition or results of operations.

With respect to IT systems, the remediation/testing phase is approximately 60%
complete, with an expected completion date of mid 1999, and the implementation
phase is expected to continue until September 1999. Certain point of sale
software systems and all time and attendance systems will be upgraded or
replaced during 1999. Additionally, human resources, payroll and general ledger
system software upgrades are expected to be completed by mid 1999.

The majority of the Company's Non--IT systems are currently Year 2000
compliant; however, certain systems, which include telephones, will need to be
upgraded or replaced. The Non--IT systems remediation/testing phase is
approximately 65% complete and full implementation is expected by mid 1999.

Richfood's evaluation of the Year 2000 readiness of the Company's material
suppliers(Richfood is the Company's primary supplier), customers and other
third parties, has not identified any class of third party providers that could
materially impact the Company's results of operations in the event of their
failure to become Year 2000 compliant. However, there can be no assurance that
the failure of any unrelated third parties to become Year 2000 compliant in a
timely manner would not result in a material adverse effect on the Company's
results of operations or financial condition.

Total costs associated with the Company's Year 2000 remediation are expected to
be approximately $3.4 million. Of this amount, approximately $3.0 million has,
or is expected to be capitalized, in accordance with GAAP, with approximately
$150,000 capitalized during fiscal 1999, and the Company expects to pay the
majority of the remaining costs over the next eight months. All expenditures by
the Company related to the Y2K Plan will be funded by cash flow from operations
and are not expected to impact other operating or investment plans. No material
information technology projects have been deferred as a result of the
implementation of the Y2K Plan.

The aforementioned costs of the Y2K Plan and the completion dates are based on
management's best estimates, which were derived from assumptions of future
events, including the availability of resources, key third party modification
plans and other factors. There can be no assurance that these estimates will
prove to be accurate, and actual results could vary due to uncertainties.


                                       17



<PAGE>   18


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

Although the Y2K Plan is expected to be adequate to address the Company's Year
2000 concerns, the Company could experience a material adverse effect on its
results of operations or financial condition if its Year 2000 compliance
schedule is not met, if the costs to remediate the Company's Year 2000 issues
significantly exceed current estimates or if material suppliers, customers and
other businesses encounter serious problems in their Year 2000 remediation
efforts. Therefore, Richfood and the Company are in the process of developing
plans to address such contingencies, with a focus on mission critical systems.
The Company and Richfood expect to complete contingency plans in mid 1999 and
expect that such plans may include provisions relating to, among other things,
manual workarounds and adjusting staffing strategies, and will describe the
communications, operations and IT activities that will be utilized if the
contingency plans must be executed.

Richfood's Year 2000 efforts are ongoing and the Y2K Plan will continue to
evolve as new information becomes available. The failure to correct a material
Year 2000 issue could result in an interruption in certain normal business
activities and operations. Due to the general uncertainty inherent in the Year
2000 issue, resulting in part from the uncertainty of the Year 2000 readiness
of third parties upon whom Richfood and the Company rely, the Company is unable
to determine at this time whether the consequences of Year 2000 failures will
have a material adverse impact on the Company's financial condition or results
of operations. However, the Company believes that, with the implementation of
the Y2K Plan as scheduled, the possibility of significant interruptions of
normal operations should be reduced.



                                       18


<PAGE>   19


Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

The registrant's market risk exposure is not material. Interest on both the
Company's notes receivable and Senior Notes are at fixed rates. The Company
does not have any other financial instruments that result in material exposure
to interest rate risk.



                                       19


<PAGE>   20


Item 8.     Financial Statements and Supplementary Data

<TABLE>
<CAPTION>
Financial Statements                                            Page
--------------------                                            ----
    <S>                                                         <C>
    Report of Independent Auditors                               21

    Report of Independent Public Accountants                     22

    Consolidated Balance Sheets                                  23-24

    Consolidated Statements of Operations                        25

    Consolidated Statements of Stockholder's
      Equity                                                     26

    Consolidated Statements of Cash Flows                        27-29

    Notes to Consolidated Financial Statements                   30-41
</TABLE>


                                       20


<PAGE>   21


                         REPORT OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS
SFW HOLDING CORP.:

We have audited the accompanying consolidated balance sheet of SFW Holding
Corp. (a Delaware corporation and wholly owned subsidiary of Dart Group
Corporation) and subsidiaries (the "Company"), as of January 30, 1999, and the
related consolidated statements of operations, stockholder's equity and cash
flows for the thirty-seven week period ended January 30, 1999 and the fifteen
week period ended May 18, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The consolidated
balance sheet of SFW Holding Corp. and subsidiaries as of January 31, 1998 and
the related consolidated statements of operations, stockholder's equity and
cash flows for each of the fiscal years in the two-year period ended January
31, 1998, were audited by other auditors whose report, dated April 28, 1998,
expressed an unqualified opinion on those statements.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SFW Holding Corp. and
subsidiaries as of January 30, 1999, and the results of their operations and
their cash flows for the thirty-seven week period ended January 30, 1999 and
the fifteen week period ended May 18, 1998, in conformity with generally
accepted accounting principles.

                                                     /s/ Ernst & Young LLP

Richmond, Virginia
April 26, 1999


                                       21


<PAGE>   22


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF SFW HOLDING CORP.:

We have audited the accompanying consolidated balance sheet of SFW Holding
Corp., as defined in Note 1, (a Delaware corporation and wholly owned
subsidiary of Dart Group Corporation) and subsidiaries (the "Company"), as of
January 31, 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the two fiscal years in the
fifty-two week period ended January 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SFW Holding Corp. and
subsidiaries as of January 31, 1998, and the results of their operations and
their cash flows for each of the two fiscal years in the fifty-two week period
ended January 31, 1998, in conformity with generally accepted accounting
principles.

Effective February 6, 1997, the Company changed its method of depreciating
property and equipment (see Note 1).

                                                    /s/  ARTHUR ANDERSEN LLP

Washington, D.C.
April 28, 1998



                                       22


<PAGE>   23


                       SFW HOLDING CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                 Post-Dart
                                                Acquisition
                                                January 30,   January 31,
ASSETS                                              1999        1998
                                               ------------  ------------
<S>                                            <C>           <C>
Current Assets:
  Cash and equivalents                           $  6,602     $  4,027
  Marketable debt securities                          -            522
  Accounts receivable, net of allowance of
    $500 at January 30, 1999                       13,263        7,950
  Inventories                                      31,477       30,795
  Prepaid income taxes                                -          1,217
  Deferred income taxes                             3,432        4,254
  Prepaid expenses                                  1,612        2,173
  Due from affiliate                                  -            522
                                                 --------     --------
    Total current assets                           56,386       51,460
                                                 --------     --------

Property and Equipment, at cost:
  Land and buildings                                9,000        7,503
  Furniture, fixtures and equipment                45,276       64,515
  Leasehold improvements                            2,388        3,842
                                                 --------     --------
                                                   56,664       75,860
  Accumulated depreciation and amortization         3,763       36,973
                                                 --------     --------
      Net property and equipment                   52,901       38,887
                                                 --------     --------

Deferred Financing Costs                              -          6,543
Goodwill net of accumulated amortization of
  $5,809 and $3,631                               311,371      145,118
Lease Rights                                       29,031       11,689
Note Receivable from Dart                          38,860       35,374
Other Assets                                        1,240          861
                                                 --------     --------

  Total assets                                   $489,789     $289,932
                                                 ========     ========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

                                       23


<PAGE>   24


                       SFW HOLDING CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                Post-Dart
                                               Acquisition
                                               -----------
                                               January 30,   January 31,
LIABILITIES AND STOCKHOLDER'S EQUITY              1999        1998
                                              ------------  -----------
<S>                                           <C>           <C>
Current Liabilities:
  Accounts payable, trade                      $ 12,283      $ 40,006
  Accrued expenses
    Salaries and benefits                         5,401         4,490
    Taxes other than income                       2,525         2,687
    Interest                                      2,378         2,654
    Insurance                                     4,881         4,530
    Other                                         5,840         1,794
  Current portion of capital lease obligations      531           -
  Income taxes payable                              800           -
  Due to affiliates                              26,038           334
                                               --------      --------
    Total current liabilities                    60,677        56,495
                                               --------      --------

Senior Notes due 2004                           211,764       200,000
Capital Lease Obligations                        12,709        11,315
Deferred Income Taxes                            12,832         9,625
Other Liabilities                                 6,827         6,549
                                               --------      --------
    Total liabilities                           304,809       283,984
                                               --------      --------

Commitments and Contingencies (Notes 5 and 8)
Stockholder's Equity:
  Common Stock, voting, par value
    $0.01 per share, 1,000 shares authorized,
    issued and outstanding                          -             -
  Paid-in-capital                               179,091        31,961
  Retained earnings (deficit)                     5,889       (26,013)
                                               --------      --------
    Total stockholder's equity                  184,980         5,948
                                               --------      --------
    Total liabilities and stockholder's
      equity                                   $489,789      $289,932
                                               ========      ========
</TABLE>


The accompanying notes are an integral part of these consolidated balance
sheets.


                                       24


<PAGE>   25


                       SFW HOLDING CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (in thousands)

<TABLE>
<CAPTION>
                             Post-Dart
                            Acquisition
                            -----------
                             January 30,     May 18,     January 31,   January 31,
                               1999           1998          1998          1997
                             ----------   -----------   ----------     ----------
                             (37 weeks)    (15 weeks)
<S>                          <C>          <C>           <C>            <C>
Sales                        $  636,507   $  249,052    $  855,769     $     -
Cost of sales                   481,205      190,799       656,572           -
                             ----------   ----------    ----------     ----------
    Gross profit                155,302       58,253       199,197           -
                             ----------   ----------    ----------     ----------
Selling and administrative
  expenses                      122,306       47,990       160,713           -
Depreciation and
  amortization                   10,130        3,354        11,090           -
                             ----------   ----------    ----------     ----------
      Operating income           22,866        6,909        27,394           -

Interest income                   2,684        1,544         3,587           -
Interest expense                 12,156        6,371        21,079           -
Equity in income from
  affiliate                         -            -             -          11,405
                             ----------   ----------    ----------     ----------
Income before income taxes,
  extraordinary item and
  cumulative effect of
  accounting change              13,394        2,082         9,902        11,405
Income taxes                      7,505          890         4,801         2,734
                             ----------   ----------    ----------     ----------
Income before extraordinary
  item and cumulative effect
  of accounting change            5,889        1,192         5,101         8,671
Extraordinary item:
  Loss on early
    extinguishment of debt,
    net of income taxes of
    $2,150                          -            -          (3,126)          -
Cumulative effect of
    accounting change, net
    of income taxes of
    $1,344                          -            -           1,729           -
                             ----------   ----------    ----------     ----------
Net income                   $    5,889   $    1,192    $    3,704     $    8,671
                             ==========    ==========    ==========    ==========
</TABLE>


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


                                       25

<PAGE>   26


                       SFW HOLDING CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                             Post-Dart
                            Acquisition
                            -----------
                             January 30,    May 18,      January 31,   January 31,
                                1998         1998           1998          1997
                             ----------   ----------     -----------   -----------
                             (37 weeks)   (15 weeks)
<S>                          <C>          <C>           <C>           <C>
Common Stock
 Balance, beginning
  and end of period         $     -        $     -       $     -       $     -
                            ==========     ==========    ==========    ==========

Paid in Capital:
 Balance, beginning of
   period                    $  179,091    $   31,961    $   31,961    $   29,227
 Dart Acquisition (Note 2)          -         147,130           -             -
 Tax obligation assumed by
   parent                           -             -             -           2,734
                             ----------    ----------    ----------    ----------
 Balance, end of period      $  179,091    $  179,091    $   31,961    $   31,961
                             ==========    ==========    ==========    ==========

Retained Earnings:              -
 Balance, beginning
   of period                 $      -      $  (26,013)   $   20,283    $   16,612
 Net income                       5,889         1,192         3,704         8,671
 Dart Acquisition (Note 2)          -          24,821           -             -
 Stockholder distributions          -             -         (50,000)       (5,000)
                             ----------    ----------    ----------    ----------
 Balance, end of period      $    5,889    $      -      $  (26,013)   $   20,283
                             ==========    ==========    ==========    ==========

Common Stock Outstanding:
  Balance, beginning and
    end of period                     1             1             1             1
                             ==========     ==========    =========    ==========
</TABLE>

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

                                       26


<PAGE>   27


                       SFW HOLDING CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                             Post-Dart
                            Acquisition
                            -----------
                             January 30,     May 18,   January 31,  January 31,
                                1999         1998         1998         1997
                             ----------   ----------   ----------   -----------
                              (37 weeks)  (15 weeks)   (52 weeks)    (52 weeks)
<S>                          <C>          <C>          <C>          <C>
Cash flows from operating
  activities:
  Net income                   $  5,889    $  1,192     $  3,704     $  8,671
  Adjustments to reconcile
    net income to net cash
    provided by (used in)
    operating activities:
    Depreciation and
      amortization               11,006       3,354       11,090          -
    Cumulative effect of
      accounting change             -           -         (1,729)         -
    Amortization of deferred
      financing costs               -           173        1,214          -
    Amortization of
      Senior Notes fair value
      adjustment                 (2,554)        -            -            -
    Deferred income taxes        (1,263)       (275)        (866)         -
    Write-off Increasing Rate
      Notes financing costs         -           -          5,276          -
    Other                           712         294          991          -
    Equity in earnings of
      affiliate                     -           -            -         (8,671)
  Changes in assets and
    liabilities:
    Accounts receivable          (4,368)     (1,445)         575          -
    Inventories                   1,970       1,666       (1,096)         -
    Other assets                   (207)        348         (174)         -
    Due to/from affiliates       20,030        (652)         -            -
    Accounts payable            (30,924)      3,101       (1,824)         -
    Accrued expenses             (7,730)      6,722        2,688          -
    Income taxes                  1,493         524       (1,217)         -
    Closed store reserve           (290)       (107)        (353)         -
    Deferred income                 560        (127)      (1,650)         -
                               --------    --------     --------      --------
    Net cash provided by
      (used in)operating
       activities              $ (5,676)   $ 14,768     $ 16,629     $    -
                               --------     --------     --------     --------
</TABLE>


                            (continued on next page)

                                       27

<PAGE>   28


                       SFW HOLDING CORP. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (in thousands)

<TABLE>
<CAPTION>
                             Post-Dart
                            Acquisition
                            -----------
                             January 30,    May 18,    January 31,  January 31,
                                 1999        1998         1998         1997
                             -----------  ----------   -----------  ----------
                              (37 weeks)  (15 weeks)   (52 weeks)   (52 weeks)
<S>                           <C>         <C>          <C>          <C>
Cash flows from investing
  activities:
  Capital expenditures         $ (3,435)   $ (2,960)    $ (9,497)    $    -
  Dividend from Shoppers            -           -            -          5,000
  Purchase of short-
    term investments             (1,449)     (2,155)     (36,093)         -
  Sales/maturities of short-
    term investments              4,121         -        131,190          -
                               --------    --------     --------     --------
Net cash provided by
      (used in) investing
       activities              $   (763)   $ (5,115)    $ 85,600     $  5,000
                               --------    --------     --------     --------

Cash flows from financing
  activities:
  Dividends to stockholders    $    -      $    -       $(50,000)    $ (5,000)
  Payments for acquisition
    and deferred
    financing costs                (116)       (178)     (13,843)         -
Proceeds from Senior Notes          -            -       200,000          -
  Repayment of Increasing
    Rate Notes                      -           -       (140,000)         -
  Restricted proceeds               -           -        (50,218)         -
  Release of Restricted
    Proceeds                        -           -         50,000          -
  Notes receivable from
    Dart                            -           -        (35,000)         -
  Payment of acquisition debt       -           -        (72,800)         -
  Principal payments under
    capital
    lease obligations              (310)        (35)         (80)         -
                               --------    --------    ---------    -------
      Net cash used in
       financing activities    $   (426)   $   (213)   $(111,941)   $  (5,000)
                               --------    --------    ---------    ---------

Net increase (decrease) in
  cash and equivalents         $ (6,865)   $  9,440    $  (9,712)   $     -
Cash and equivalents,
  beginning of period            13,467       4,027       13,739          -
                               --------    --------    ---------    -------
Cash and equivalents,
  end of period                $  6,602    $ 13,467    $   4,027    $     -
                               ========     ========    =========    =======
</TABLE>


                            (continued on next page)

                                       28

<PAGE>   29


                       SFW HOLDING CORP. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (in thousands)


<TABLE>
<CAPTION>
                             Post-Dart
                            Acquisition
                            -----------
                             January 30,    May 18,    January 31,  January 31,
                                 1999        1998         1998         1997
                             ----------   -----------  -----------  ----------
                              (37 weeks)  (15 weeks)   (52 weeks)   (52 weeks)
<S>                         <C>           <C>          <C>          <C>
Supplemental disclosure of
  cash flow information:
  Cash paid during the
    period for:
    Income taxes               $      20   $   1,242    $   4,812    $     -
    Interest                      19,593          47       16,868          -
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.
                                       29



<PAGE>   30


                       SFW HOLDING CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The accompanying consolidated financial statements include the accounts of SFW
Holding Corp. (a Delaware corporation and a wholly-owned subsidiary of Dart
Group Corporation ("Dart")) and its subsidiaries, (collectively "SFW Holding"
or the "Company") for the 37 weeks ended January 30, 1999 ("37 weeks of fiscal
1999"),the 15 weeks ended May 18, 1998 ("15 weeks of fiscal 1999"), the fiscal
year ended January 31, 1998 ("fiscal 1998") and the fiscal year ended January
31, 1997 ("fiscal 1997"). All significant intercompany accounts and
transactions have been eliminated.

On February 6, 1997, SFW Holding acquired the 50% interest in Shoppers Food
Warehouse Corp. ("Shoppers") that it did not already own at a cost of $210
million (the "Shoppers Acquisition") (see Note 2). The accounts of SFW Holding,
the successor to Dart's ownership of Shoppers, are reflected as if SFW Holding
held the common stock of Shoppers since fiscal 1989. Shoppers is engaged in the
business of operating discount grocery stores in Maryland and Virginia.

As of the Shoppers Acquisition date, Dart contributed its initial 50% interest
in Shoppers to SFW Holding for 100% of the stock of SFW Holding. This interest
was recorded at Dart's carryover basis. Subsequent to the merger of SFW
Acquisition Corp. (an indirect subsidiary of Dart) into Shoppers, SFW Holding
became the immediate parent of Shoppers. SFW Holding's sole purpose is to own
Shoppers' stock.

On May 18, 1998, a wholly-owned subsidiary of Richfood Holdings, Inc.
("Richfood") acquired all of the outstanding shares of Dart, (the "Dart
Acquisition")(see Note 2). As a result, Richfood indirectly owns 100% of the
outstanding common stock of the Company.

Fiscal Year

In connection with the Shoppers Acquisition, the Company adopted a fiscal year
ending on the Saturday closest to January 31 to conform to Shoppers fiscal
year. Prior to that, the Company's accounts are presented on fiscal years
ending on January 31.

Use of Estimates in Financial Statements

The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

Cash Equivalents and Marketable Debt Securities

The Company considers all highly liquid temporary cash investments with initial

                                       30


<PAGE>   31


                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

maturities of three months or less to be cash equivalents. At January 30, 1999,
short-term investments of approximately $2.1 million were invested in money
market funds. At January 31, 1998, Shoppers owned marketable debt securities
with a fair value of $522,000, which approximated the cost of such securities.

Inventories

Shoppers' inventories are priced at the lower of cost or market. For
substantially all inventories, cost is determined using the last-in, first-out
("LIFO") method. If replacement cost, which approximates the first-in,
first-out method ("FIFO"), had been used, inventories would have been greater
by approximately $4,743,000 as of January 31, 1998. At January 30, 1999, the
LIFO value of inventories approximated their replacement cost. Net income would
have been higher by approximately $200,000, and $368,000 for the 15 weeks of
fiscal 1999 and fiscal 1998, respectively, if inventory had been priced on a
FIFO basis.

Accounts Receivable

Accounts receivable include amounts due from vendors for coupons remitted,
cooperative advertising and merchandise rebates.

Property and Equipment

Property and equipment are stated at cost. In connection with the Shoppers
Acquisition, Shoppers adopted Dart's method of depreciating property and
equipment on a straight line basis. Property and equipment is depreciated over
the estimated useful life of the assets, generally five to ten years. Property
and equipment includes $8.0 million of assets under a capital lease, less the
related accumulated amortization of $476,000 at January 30, 1999. Depreciation
and amortization expense relating to property and equipment, including assets
under capital lease, was approximately $3.7 million, $2.1 million and $5.0
million during the 37 weeks of fiscal 1999, the 15 weeks of fiscal 1999 and
fiscal 1998, respectively. Prior to the Shoppers Acquisition, Shoppers
depreciated property and equipment using accelerated methods over the estimated
useful lives of the assets, generally five to seven years. Pro forma net
income, which represents historical net income adjusted as if the change in
depreciation method was applied retroactively, was approximately $8.5 million
for fiscal 1997.

Insurance

Shoppers maintains general liability and workers' compensation insurance with
self-insured deductibles and maintains health coverage liabilities on a
self-funded basis. An estimate of the obligation for self-insurance claims is
accrued annually and adjusted periodically based on historical data and
management's expectations regarding obligations for reported claims. Expenses
arising from claims are accrued as claims become subject to estimation.
Self-insurance liabilities are based on claims filed plus an additional amount
for incurred but not reported claims. These liabilities are not discounted.


                                       31


<PAGE>   32

                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Income Taxes

Shoppers provides a deferred tax expense or benefit equal to the change in the
net deferred taxes during the period. Deferred income taxes represent the
future net tax effects resulting from temporary differences between the
financial statements and tax basis of assets and liabilities using enacted tax
rates in effect for the period in which the differences are expected to be
recovered or settled.

Lease Rights

Favorable lease rights are amortized over the term of the leases using the
straight-line method.

Store Opening and Closing Costs

All costs of a noncapital nature incurred in opening a new store are charged to
expense as incurred. Shoppers opened one new store and three new stores during
the 37 weeks of fiscal 1999 and fiscal 1998, respectively.

The costs associated with store closings are charged to selling and
administrative expense when management makes the decision to close a store.
Such costs consist primarily of lease payments and other costs, net of
estimated sublease income.

Deferred Income

Shoppers has entered into various agreements with vendors and suppliers that
provide for the payment of cash or the receipt of merchandise at the beginning
or during the contract period. These amounts are deferred and amortized over
the expected lives of the contracts.

Long Lived Assets

Shoppers evaluates the recoverability of long-lived assets to be held and used,
and goodwill for impairment when events or changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable. An
evaluation is made periodically and is based on such factors as the occurrence
of a significant change in the environment in which the business operates or if
the expected future undiscounted net cash flows would become less than the
carrying amount of the asset. If an evaluation is required, the estimated
future undiscounted cash flows associated with the asset are compared to the
asset's carrying amount to determine if an adjustment to fair value is
required. Shoppers reports long-lived assets and certain identifiable
intangibles to be disposed of at the lower of carrying amount or estimated fair
value less costs to sell. Shoppers has determined that as of January 30, 1999,
there has been no impairment in the carrying value of long-lived assets.

Concentration of Credit Risk

Shoppers' assets that are exposed to credit risk consist primarily of cash and


                                       32

<PAGE>   33

                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


equivalents, short-term investments, and accounts receivable. Shoppers
maintains cash and equivalents with major banks in its marketplace. Shoppers
performs periodic evaluations of the relative credit standing of the financial
institutions with which it does business. Shoppers' short-term investments are
invested in money market funds. Shoppers' accounts receivable balance results
primarily from the amounts due from its vendors for various promotional
programs. Shoppers periodically reviews the collectibility of its accounts
receivable balance and provides for estimated uncollectible accounts.

Fair Value of Financial Instruments

At January 30, 1999 and January 31, 1998, the carrying amount of financial
instruments included in current assets and current liabilities approximates
fair value due to the short maturity of those instruments.

The fair value for Shoppers' fixed rate Senior Notes (see Note 3) is based on
quoted market prices. The fair value of Shoppers' outstanding Senior Notes on
January 30, 1999 was approximately $211.3 million. The fair value of Notes
Receivable from Dart (see Note 7) approximates the carrying value.

Earnings Per Share

Earnings per common share is not presented as SFW Holding is a wholly-owned
indirect subsidiary of Richfood.

Reclassifications

Certain amounts in prior year financial statements have been reclassified to
conform with current year presentation.

NOTE 2 - ACQUISITIONS

Dart Acquisition

On May 18, 1998, a wholly-owned subsidiary of Richfood acquired all of the
outstanding shares of Dart, which owns 100% of the outstanding common stock of
the Company, for $160 per share, net to the seller in cash, or approximately
$201 million. In connection with the Dart Acquisition, Richfood caused its
subsidiary to merge with and into Dart in a transaction in which Dart became a
wholly-owned subsidiary of Richfood. As a result of the Dart Acquisition,
Richfood indirectly owns 100% of the outstanding common stock of the Company
and Shoppers.

Richfood has accounted for the Dart Acquisition using the purchase method of
accounting, and accordingly, a new accounting basis began as of May 18, 1998 and
the assets and liabilities of Shoppers were restated to reflect their estimated
fair market values as of that date. Fiscal 1999 includes the results of
operations for 37 weeks under this new basis of accounting. The excess of the
Dart Acquisition purchase price allocated to Shoppers over net assets of
Shoppers acquired (goodwill) has been pushed-down to Shoppers. This goodwill of
approximately $317.2 million is based on a preliminary allocation of the


                                       33

<PAGE>   34


                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

purchase price and is being amortized on a straight line basis over 40 years.

Pro forma operating results for the 52 week periods ended January 30, 1999 and
January 31, 1998 reflect the Dart Acquisition as if it had occurred on February
1, 1997. The following unaudited pro forma results of the Company reflect the
push down of acquisition entries, including, but not limited to, additional
amortization of goodwill, amortization of the fair market adjustment of the
Senior Notes (see Note 3 - Long-Term Debt) and reversal of amortization of the
acquisition costs associated with the Shoppers Acquisition (in thousands).

<TABLE>
<CAPTION>
                                           Pro Forma             Pro Forma
                                          52 Weeks Ended       52 Weeks Ended
                                        January 30, 1999      January 31, 1998
                                      --------------------  --------------------
<S>                                   <C>                   <C>
Sales                                  $ 885,559                 $ 855,769
Income before extraordinary item
  and cumulative effect of
  accounting change                        6,504                     5,300
Net income                                 6,504                     3,903
</TABLE>

Richfood is operating Shoppers as a distinct unit within its retail division
and has indicated that it does not presently plan to make any material changes
to Shoppers' strategic focus or operational format.

Shoppers Acquisition

In June 1988, Dart acquired an initial 50% interest of Shoppers. In January
1997, Dart contributed its shares of Shoppers outstanding common stock to SFW
Holding for 100% of the common stock of SFW Holding. On February 6, 1997, SFW
Holding acquired the remaining 50% interest in Shoppers for $210 million and
Shoppers became a wholly owned subsidiary of SFW Holding and indirectly Dart.

The Shoppers Acquisition was recorded using the purchase method of accounting
and SFW Holding's interest in Shoppers was pushed down into the accompanying
financial statements. The purchase price was allocated to the assets and
liabilities of Shoppers and the excess purchase price over the net assets
acquired of $148.8 million was allocated to goodwill, which was amortized over
40 years. In conjunction with the Shoppers Acquisition, Shoppers adopted Dart's
method of depreciating property and equipment on a straight-line basis. Prior
to the Shoppers Acquisition, Shoppers used accelerated depreciation methods.

NOTE 3 - LONG-TERM DEBT

Senior Notes

In June 1997, Shoppers issued $200.0 million aggregate principal amount of 9
3/4% Senior Notes due 2004 (the "Senior Notes"). The net proceeds from the
Senior Notes was $193.5 million (after fees and expenses of approximately $6.5
million) of which $143.5 million was used to repay the acquisition debt
incurred by Dart in connection with the Shoppers Acquisition and $50.0 million
(the



                                       34

<PAGE>   35


                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


"Restricted Proceeds") was paid to Dart in the form of a $40 million dividend
and a $10 million loan for settlements with certain Dart shareholders. The
early extinguishment of Shoppers Acquisition debt resulted in the write-off of
unamortized deferred financing costs of $5.3 million, which has been presented
in the consolidated statement of operations as an extraordinary loss, net of
the related tax benefit of $2.2 million.

Interest on the Senior Notes is accrued from the date of issuance and is
payable semi-annually in arrears on each June 15 and December 15. The Senior
Notes are effectively subordinated in right of payment to all secured
indebtedness of the Company and contain certain restrictive covenants
including, (i) limitation on restricted payments, (ii) limitation on
indebtedness, (iii) limitation on investments, loans and advances, (iv)
limitation on liens, (v) limitation on transactions with affiliates, (vi)
restriction on mergers, consolidations and transfers of assets, (vii)
limitation on lines of business, (viii) limitations on asset sales and (ix)
limitation on issuance and sale of capital stock of subsidiaries. The amount of
dividend payments that the Company can make to Dart is also subject to certain
restrictions.

The Senior Notes are fully and unconditionally guaranteed by SFW Holding. The
guarantee is secured by a first priority security interest in the capital stock
of Shoppers owned by SFW Holding.

On May 18, 1998, in connection with the Dart Acquisition, the Senior Notes were
adjusted on Shoppers balance sheet to their fair value of $221.5 million. The
$21.5 million of fair value in excess of face value of the Senior Notes is
being amortized on a straight-line basis over the stated maturity period. In
June 1998, Richfood purchased $6.5 million in face amount of the outstanding
Senior Notes in an open market transaction for a total cash payment of
approximately $7.2 million, including accrued interest.

NOTE 4 - INCOME TAXES

The provision for income taxes before extraordinary items and cumulative effect
of accounting change is comprised of the following (in thousands):

<TABLE>
<CAPTION>
                               Post-Dart
                              Acquisition
                              -----------
                              January 30,    May 18,     January 31,   January 31,
                                  1999         1998          1998          1997
                              -----------   --------     ----------    -----------
                               (37 Weeks)    (15 Weeks)    (52 Weeks)   (52 Weeks)
<S>                           <C>           <C>          <C>           <C>
Current income tax provision:
  Federal                       $  8,562      $  1,070      $  4,068     $    -
  State                            1,180            37           207          -
Deferred income tax
  (benefit) provision
   Federal                        (1,895)         (222)          526        2,734
   State                            (342)            5           -            -
                                --------      --------      --------     --------
                                $  7,505      $    890      $  4,801     $  2,734
                                ========      =========     =========    =========
</TABLE>


                                       35


<PAGE>   36


                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


This effective income tax rate is reconciled to the Federal statutory rate as
follows:

<TABLE>
<CAPTION>
                                Post-Dart
                               Acquisition
                               -----------
                              January 30,     May 18,     January 31,     January 31,
                                 1999           1998           1998          1997
                              -----------   -----------   ------------    -----------
                               (37 Weeks)   (15 Weeks)      (52 Weeks)     (52 Weeks)
<S>                           <C>           <C>           <C>             <C>
Federal statutory rate             35.0%         35.0%        35.0%         35.0%
Increase in taxes resulting
  from:
  State income taxes, net of
    Federal income tax benefit      4.1           1.3           0.9         (12.3)
  Amortization of Goodwill         16.9           6.4          12.8           9.8
  Other                              -              -          (0.2)         (8.5)
                                --------      --------      --------      -------
  Effective tax rate               56.0 %        42.7 %        48.5 %        24.0 %
                                ========       ========      ========      ========
</TABLE>

As a result of the Dart Acquisition and the Shoppers Acquisition, certain
differences have arisen between the book and tax basis of various assets and
liabilities of the Company (see Note 2) and are reflected in the table that
follows. Temporary differences that give rise to the deferred tax assets and
liabilities on a consolidated basis are as follows (in thousands):

<TABLE>
<CAPTION>
                                                  Post-Dart
                                                 Acquisition
                                                  January 30,    January 31,
                                                     1999           1998
                                                  -----------    -----------
<S>                                             <C>              <C>
Deferred tax assets:
  Reserves for store
    closings and other                             $    492       $    210
  Deferred Rent                                         272            379
  Capital Lease                                       2,442            583
  Employee Benefits                                   4,240          3,547
  Deferred Income                                       854            306
  Other                                                 744            561
                                                   --------       --------
                                                   $  9,044       $  5,586
                                                   ========       ========

Deferred tax liabilities:
  Depreciation                                     $  2,492       $  1,436
  Lease Rights                                        5,691          4,329
  Inventory                                             934            -
  Purchase accounting
    asset basis adjustments                           9,327          5,192
                                                   --------       --------
                                                   $ 18,444       $ 10,957
                                                   ========       ========
Net deferred tax
   liability                                       $ (9,400)      $ (5,371)
                                                   ========        ========
</TABLE>

A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The Company
believes that no valuation allowance is necessary due to its history of
profitable operations.


                                       36

<PAGE>   37


                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Tax Sharing Agreement with Dart

In February 1997, Dart and Shoppers entered into a tax sharing agreement
whereby the federal and certain state and local income tax returns of Shoppers
would be consolidated in the federal income tax returns to be filed by Dart.
This tax sharing arrangement was intended to allow Dart to utilize its net
operating loss carryforwards. The Company's consolidated financial statements
provide income taxes on a separate Company basis. As a result of the Dart
Acquisition, Shoppers' and SFW Holding's federal and certain state income tax
returns are consolidated with Richfood's tax returns.

NOTE 5 - LEASE COMMITMENTS

Shoppers leases retail store space under noncancelable lease agreements ranging
from 1 to 20 years. Renewal options are available on the majority of the leases
for one or more periods of five years each. Most leases require the payment of
taxes and maintenance costs, and some leases provide for additional rentals
based on sales in excess of specified minimums. All store leases have stated
periodic rental increases. The increases are amortized over the lives of the
leases. Rent expense includes approximately $712,000, $294,000 and $991,000 of
amortized rental increases for the 37 weeks of fiscal 1999, the 15 weeks of
fiscal 1999 and fiscal 1998, respectively.

Following is a schedule of annual future minimum payments under the capital
lease for office space, assuming future annual increases of 3 percent, and
noncancelable operating leases, which have initial or remaining terms in excess
of one year at January 30, 1999 (in thousands):

<TABLE>
<CAPTION>
                                         Capital     Operating
        Fiscal Year                       Lease       Leases
        -----------                     ---------     --------
        <S>                             <C>          <C>
        2000                            $  1,397      $ 16,651
        2001                               1,439        16,357
        2002                               1,482        15,977
        2003                               1,527        15,601
        2004                               1,573        15,568
        2005-2018                         12,245       140,450
                                        --------      --------

          Total                           19,663      $220,604
                                                      ========
        Imputed Interest                   6,423
                                        --------
        Present value of net minimum
        lease payments                    13,240
      Current maturities                     531
                                        --------
      Long-term capital lease
        obligations                    $  12,709
                                       =========
</TABLE>

Minimum capital lease and operating lease obligations have not been reduced by
future sublease rentals of $529,000 receivable in the future under sublease
agreements discussed below.


                                       37

<PAGE>   38

                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Rent expense for operating leases charged to operations is as follows (in
thousands):

<TABLE>
<CAPTION>
                                  Post-Dart
                                 Acquisition
                                 -----------
                                    January 30,    May 18,      January 31,
                                       1999         1998           1998
                                    ----------   ----------     ----------
                                    (37 Weeks)   (15 Weeks)     (52 Weeks)
<S>                                <C>           <C>            <C>
Minimum rentals                     $ 11,605      $  4,513       $ 14,088
Contingent rentals                     3,860         1,390          5,110
                                    --------      --------       --------
  Total                             $ 15,465      $  5,903       $ 19,198
                                    ========       ========       ========
</TABLE>

Related-Party Leases

For periods prior to February 1, 1998, Shoppers leased its office space and
certain store locations from related parties. The following lease agreements
were no longer related party for periods subsequent to January 31, 1998.

In July 1990, Shoppers entered into an agreement to lease an 86,000 square foot
office building in Lanham, Maryland, from a private partnership (the
"Partnership") which is owned by former stockholders of the Company (members of
the Herman family) and former stockholders of Dart (members of the Haft
family). The lease is for 20 years and it commenced December 10, 1990. The
lease provides for yearly increasing rental payments, based upon the Consumer
Price Index for the Washington D.C., metropolitan statistical area; however,
the annual increases will not be more than 6 percent nor less than 3 percent.
Rental payments for fiscal 1998 were approximately $1.3 million and all
remaining payments over the life of the lease aggregate approximately $19.6
million at January 30, 1999. Shoppers accounts for the lease as a capital lease
and is included in the lease commitment table above. The lease requires the
Company to pay for maintenance, utilities, insurance and taxes. The Partnership
purchased the office building for approximately $8.7 million in July 1990.

During fiscal 1998, Shoppers made rental payments of approximately $5.9 million
on store leases to partnerships related to former stockholders of Dart. As of
January 31, 1998, Shoppers had ten store operating leases with partnerships
related to the former stockholders of Dart.

Subleasing Agreements

Shoppers subleases space within one store for the sale of beer and wine to an
entity affiliated with its officers. Shoppers received rental income of
approximately $207,000, $40,000 and $209,000 during the 37 weeks of fiscal
1999, the 15 weeks of fiscal 1999 and fiscal 1998, respectively, from this
entity, which is included in selling and administrative expenses.

As of January 30, 1999, there were three unaffiliated subtenants in the Lanham
office building. The subtenants are leasing approximately 35,600 square feet.
The subleases expire between September 1999 and September 2000. Shoppers
received rental income of approximately $443,000, $194,000 and $600,000 in the
37 weeks of fiscal 1999 and the 15 weeks of fiscal 1999 and fiscal 1998,
respectively from its subtenants.

                                       38


<PAGE>   39

                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 6 - EMPLOYEE BENEFIT PLANS

401(k) Plan

Shoppers has a defined contribution 401(k) plan (the "401K Plan") which is
available to substantially all employees over the age of 21 who have completed
one year of continuous service. Discretionary contributions are made by the
Company in trust for the exclusive benefit of employees who participate in the
401K Plan. The Board of Directors authorized a contribution of $400,000 to the
401K Plan for fiscal 1998. Shoppers has accrued $624,000 as of January 30, 1999
for fiscal 1999 contributions to be made to the 401K Plan. Amounts accrued for
the contributions to be made to the 401K Plan are included in accrued salaries
and benefits in the accompanying financial statements.

Multiemployer Plans

Shoppers makes contributions to multiemployer plans for its union employees as
follows (in thousands):

<TABLE>
<CAPTION>
                               Post-Dart
                              Acquisition
                              -----------
                              January 30,     May 18,     January 31,
                                  1999         1998          1998
                              ----------   -----------   ------------
                               (37 Weeks)   (15 Weeks)     (52 Weeks)
<S>                           <C>          <C>           <C>
Pension                         $    633      $    238     $    842
Health and welfare                 7,477         3,118       10,725
Legal                                406           143          487
                                --------      --------     --------
                                $  8,516      $  3,499     $ 12,054
                                ========      ========     ========
</TABLE>


NOTE 7 -  TRANSACTIONS WITH AFFILIATES

Transactions with Richfood

The January 30, 1999 Consolidated Balance Sheet includes $26.0 million due to
affiliates, which consists primarily of $9.7 million for the payment of
inventory purchases from subsidiaries of Richfood, approximately $8.4 million
for income tax payments and $7.2 million due to Richfood for its purchase of
$6.5 million in face amount of the Senior Notes on June 26, 1998. Inventory
purchases from Richfood during the 37 weeks of fiscal 1999 were approximately
$361.3 million.

Transactions with Dart

Dart charged the Company, on a monthly basis, for actual expenses which related
directly to the Company's operations (primarily insurance and legal expenses).
Substantially all such charges were supported by invoices from unrelated
parties designating the Company as recipient of the related goods or services.
Such charges were approximately $0.1 million, $0.4 million and $1.6 million
during the 37 weeks of fiscal 1999, the 15 weeks of fiscal 1999, and fiscal
1998, respectively.

                                       39

<PAGE>   40


                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Dart Notes Receivable

In connection with the 1992 sale of the assets of Total Beverage Corp. by
Shoppers to Dart, Shoppers received a note receivable from Dart of
approximately $1.5 million. In May 1998, Shoppers realized $1.2 million
representing full settlement of this note. As a result,Shoppers received 
approximately $0.7 million in excess of the recorded estimated realizable value 
of the note, which was recognized in the Company's consolidated statement of 
operations during the thirteen week period ended May 2, 1998.

On September 26, 1997, Shoppers loaned Dart $10.0 million from the Restricted
Proceeds that Dart used to fund a portion of a settlement with certain members
of the Haft family who were stockholders of Dart. The loan is in the form of a
promissory note that bears interest at 9 3/4% per annum, compounded annually.
Interest and principal are payable on June 15, 2004, however, Dart may make
interest payments prior to that time.

On January 28, 1998, Shoppers loaned Dart an additional $25.0 million that Dart
used to fund a portion of a settlement with Herbert H. Haft, who was a
stockholder of Dart. The loan is in the form of a promissory note that bears
interest at 9 e/4% per annum, compounded annually. Interest and principal are
payable on June 15, 2004, however, Dart may make interest payments prior to
that time.

NOTE 8 - LITIGATION

In the ordinary course of business, Shoppers is party to various legal actions
that the Company believes are routine in nature and incidental to the operation
of its business. The Company believes that the outcome of the proceedings to
which Shoppers currently is a party will not have a material adverse effect
upon Shoppers' business, financial condition or results of operations.

NOTE 9 -  SUMMARIZED FINANCIAL DATA

Summary Income Data for Unconsolidated Subsidiary

The following information reflects the results of Shoppers for the year ended
January 31, 1997 (in thousands):


              Revenue                                $862,395
              Gross Profit                            199,197
              Net Income                               21,251



The amounts included in net income above do not reflect the amortization of the
difference between SFW Holding's original purchase price and the equity in net
assets or certain tax contingencies recorded by the Company. The following is a
reconciliation of the net income as reported by Shoppers with the equity in
affiliate as reported on the Company's Consolidated Statements of Operations (in
thousands):


                                       40


<PAGE>   41


                       SFW HOLDING CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<S>                                               <C>
Shoppers Net Income                               $ 21,251
                                                  --------

50% of Shoppers Net income                        $ 10,626
Amortization of Excess Purchase Price
  over Net Assets Acquired                          (1,126)
Reversal of certain tax contingencies                1,905
                                                  --------
                                                  $ 11,405
                                                  ========
</TABLE>

On February 6, 1997, SFW Holding acquired the other 50% interest in Shoppers
for $210 million. As a result, the accounts of Shoppers are consolidated with
the Company effective February 6, 1997.

NOTE 10 - INTERIM FINANCIAL DATA  (UNAUDITED)

Selected interim financial data for the fiscal years ended January 30, 1999 and
January 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                             (in thousands)
THIRTEEN WEEK
PERIOD ENDED:             ------------------------------------------------
                           JANUARY 30,  OCTOBER 31,   AUGUST 1,     MAY 2,
                             1999         1998         1998 (1)     1998
                          ---------    ----------   -----------  -----------
<S>                       <C>          <C>          <C>          <C>
Sales                      $226,603     $220,431     $224,527     $213,998
Gross Profit                 55,165       55,153       53,747       49,490
Net Income                    2,599        3,153          122        1,207


THIRTEEN WEEK
PERIOD ENDED:             ------------------------------------------------
                           JANUARY 31,  NOVEMBER 1,   AUGUST 2,     MAY 3,
                             1998         1997         1997         1997
                          ---------    ----------   -----------  -----------
Sales                      $222,169     $214,076     $209,543     $209,981
Gross Profit                 51,668       48,369       48,714       50,446
Net Income (Loss)(2)            989         (846)      (1,345)       4,906
</TABLE>


(1)           Includes two weeks results of operations prior to the Dart
              Acquisition and eleven weeks under the new basis of accounting
              established in connection with the Dart Acquisition (Note 2).

(2)           Includes income of $1,729, net of income taxes, during the 13
              weeks ended May 3, 1997 for the cumulative effect of an
              accounting change and a loss of $3,126, net of income taxes,
              during the 13 weeks ended July 2, 1997 for an extraordinary loss
              on early extinguishment of debt.


                                       41

<PAGE>   42



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

    Not required to be included in this Form 10-K in accordance with the
    instructions to Item 304 of Regulation S-K.




                                       42

<PAGE>   43


                                    PART III

Item 10.    Directors, Executive Officers, Promoters and Control Persons of the
            Registrant.

            Information omitted in accordance with General Instruction I(2)(c).

Item 11.    Executive Compensation.

            Information omitted in accordance with General Instruction I(2)(c).

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

            Information omitted in accordance with General Instruction I(2)(c).


Item 13.    Certain Relationships and Related Transactions.

            Information omitted in accordance with General Instruction I(2)(c).



                                       43

<PAGE>   44


                                     Part IV

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

(a) (1)   Financial Statements

          See Item 8.

(a) (2)   Schedules

          All schedules (except Schedule I) are omitted because the required
          information is not applicable or it is presented in the consolidated
          financial statements or related notes or the required information is
          not material.

(a) (3)   Exhibits

     4.1  Indenture, dated June 26, 1997, by and among Shoppers Food Warehouse
          Corp., SFW Holding Corp. and Norwest Bank Minnesota, National
          Association (incorporated by reference to Exhibit 4.1 to Shoppers
          Food Warehouse Corp. Form S-4, Registration No. 333-32825, filed
          with the SEC August 5, 1997).

     4.2  Form of Shoppers Food Warehouse Corp. Global Security, dated June
          26, 1997, (incorporated by reference to Exhibit 4.1 to Shoppers Food
          Warehouse Corp. Form S-4, Registration No. 333-32825, filed with the
          SEC on August 5, 1997).

    10.1  Employment Agreement, dated August 18, 1997, between William White
          and Shoppers Food Warehouse Corp. (incorporated by reference to
          Exhibit 10.2- to the  Dart Group Corporation (No. 0-1946) Form 10-Q
          filed with the SEC on September 15, 1997).

    10.2  Promissory Notes dated, September 26, 1997, and January 28, 1998,
          from Dart Group Corporation to Shoppers Food Warehouse Corp.
          (incorporated by reference to Exhibit 10.3 to Shoppers Food
          Warehouse Corp. Annual Report on Form 10-K filed with the SEC on May
          1, 1998).

    27.1  Financial Data Schedule

          Exhibit 10.1 is a management contract required to be filed as an
          exhibit hereto.

(b)       Reports on Form 8-K

          SFW Holding Corp. filed a Current Report on Form 8-K on
          February 12, 1999 reporting under Item 4 - Changes in
          Registrant's Certifying Accountant.


                                       44



<PAGE>   45


                                SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                        SFW HOLDING CORP.


Date: April 30, 1999              By: /s/ John E. Stokely
      -----------------------         ---------------------------
                                      John E. Stokely
                                      President

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


Date: April 30, 1999                  /s/ John E. Stokely
      -----------------------         ----------------------------
                                      John E. Stokely
                                      Director and President


Date: April 30, 1999                  /s/ John C. Belknap
      -----------------------         ----------------------------
                                      John C. Belknap
                                      Director and Executive Vice President


Date: April 30, 1999                  /s/ Elliott Arditti
      -----------------------         ----------------------------
                                      Elliott Arditti
                                      Senior Vice President and Secretary


Date: April 30, 1999                  /s/ David W. Hoover
      -----------------------         ----------------------------
                                      David W. Hoover
                                      Vice President


Date: April 30, 1999                  /s/ Ronald T. Rice
      -----------------------         ----------------------------
                                      Ronald T. Rice
                                      Vice President and Controller



                                       45

<PAGE>   46



SCHEDULE I

        REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE

We have audited the consolidated financial statements of SFW Holding Corp. and
subsidiaries (the "Company") as of January 30, 1999, and for the thirty-seven
week period ended January 30, 1999 and the fifteen week period ended May 18,
1998, and have issued our report thereon dated April 26, 1999 (included
elsewhere in this annual report on Form 10-K). Our audit also included the
financial statement schedule listed in Item 14(a)(2) of this annual report on
Form 10-K as of January 30, 1999, and for the thirty-seven week period ended
January 30, 1999 and the fifteen week period ended May 18, 1998. This schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audit. The financial statement schedule listed
in Item 14(a)(2) of this annual report on Form 10-K as of January 31, 1998, and
for each of the fiscal years in the two-year period ended January 31, 1998 were
audited by other auditors whose report, dated April 28, 1998, expressed an
unqualified opinion on the information set forth therein.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein as
of January 30, 1999, and for the thirty-seven week period ended January 30,
1999 and the fifteen week period ended May 18, 1998.

                                               /s/ ERNST & YOUNG LLP

Richmond, Virginia
April 26, 1999




                                      46
<PAGE>   47


SCHEDULE I

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To SFW Holding Corp.

We have audited in accordance with generally accepted auditing standards the
consolidated financial statements of SFW Holding Corp. (a Delaware corporation
and wholly owned subsidiary of Dart Group Corporation) and subsidiaries (the
"Company") included in this Form 10-K and have issued our report thereon dated
April 28, 1998. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule listed in the
index is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. The schedule has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and in our opinion fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.

                                                    /s/  Arthur Andersen LLP

Washington, D.C.
April 28, 1998



                                       47

<PAGE>   48


                                                           SCHEDULE I

                             SFW Holding Corp.

               CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                           (Parent Company Only)

                         Condensed Balanced Sheets
                              (in thousands)


<TABLE>
<CAPTION>
                                                  Post-Dart
                                                 Acquisition
                                                 -----------
                                                  January 30,    January 31,
                                                     1999          1998
                                                  ----------    -----------
<S>                                              <C>            <C>
ASSETS
Investment in and amounts due from subsidiaries     184,980          5,948
                                                 ----------     ----------
Total assets                                     $  184,980     $    5,948
                                                 ==========     ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
Stockholder's Equity:
Preferred Stock                                         -              -
Common Stock                                            -              -
Paid-in capital                                     179,091         31,961
Retained earnings (deficit)                           5,889        (26,013)
                                                 ----------     ----------
Total Stockholder's Equity                          184,980          5,948
                                                 ----------     ----------
Total Liabilities and Stockholder's Equity       $  184,980     $    5,948
                                                 ==========     ==========
</TABLE>

The accompanying notes are an integral part of these condensed financial
statements.



                                       48

<PAGE>   49


                                                             SCHEDULE I

                             SFW Holding Corp.

               CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                           (Parent Company Only)

                    Condensed Statements of Operations
                              (in thousands)

<TABLE>
<CAPTION>
                                            For the Periods Ended
                             -------------------------------------------------------
                              Post-Dart
                             Acquisition
                              January 30,     May 18,      January 31,    January 31,
                                1999           1998           1998          1997
                              ----------    ----------     -------        ----------
                              (37 weeks)    (15 weeks)     (52 weeks)     (52 weeks)
<S>                         <C>            <C>            <C>            <C>
Equity in income from
  affiliate                   $    5,889    $    1,192     $    3,704     $    8,671
                              ==========    ==========     ==========     ============
</TABLE>

The accompanying notes are an integral part of these condensed financial
statements.



                                       49


<PAGE>   50


                                                                 SCHEDULE I

                             SFW Holding Corp.

               CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                           (Parent Company Only)

                    Condensed Statements of Cash Flows
                              (in thousands)

<TABLE>
<CAPTION>
                                             For the Periods Ended
                              -------------------------------------------------------

                               Post-Dart
                              Acquisition
                               January 30      May 18,     January 31,     January 31,
                                 1999          1998           1998            1997
                              -----------   -----------    ----------      -----------
                              (37 weeks)    (15 weeks)     (52 weeks)      (52 weeks)
<S>                           <C>           <C>            <C>             <C>
Cash provided by Operating
  Activities                  $     -       $      -        $      -        $   -

Investing Activities:
  Dividends from Shoppers
    Food Warehouse Corp.      $     -       $      -        $   50,000      $    5,000
                              ---------     ----------      ----------      -------------
Cash provided by
  Investing Activities        $     -       $      -        $   50,000      $    5,000
                              ---------     ----------      ----------      -------------


Financing Activities:
  Dividends to shareholders   $     -       $      -        $  (50,000)     $   (5,000)
                              ---------     ----------      ----------      -------------
Cash used in Financing Act-
   ivities                    $     -       $      -        $  (50,000)      $  (5,000)
                              ---------     ----------      ----------       ------------


Increase for the period       $     -       $      -        $      -         $     -
Beginning of period                 -              -               -               -
                              ---------     ----------      ---------        ------------

End of period                 $     -       $      -        $      -         $     -
                              =========      ==========      ==========      ============
</TABLE>

The accompanying notes are an integral part of these condensed financial
statements.



                                       50

<PAGE>   51


                                                                 SCHEDULE I

                             SFW Holding Corp.

               CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                           (Parent Company Only)

                  Notes to Condensed Financial Statements

Note A Basis of Presentation

The accompanying condensed financial statements of SFW Holding Corp. (a
Delaware corporation), a wholly-owned subsidiary of Dart Group Corporation
includes its subsidiaries presented on an equity basis. All significant
intercompany accounts and transactions have been eliminated.

The notes to the SFW Holding Corp. and subsidiaries consolidated financial
statements are an integral part of this schedule.



                                       51


<PAGE>   52


                 SFW HOLDING CORPORATION AND SUBSIDIARIES

                               Exhibit Index

Exhibit

27.1        Financial Data Schedule




                                       52

<PAGE>   53


Exhibit 27.1           Financial Data Schedules



                                       53