FORM 10-Q


                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549


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


               For the quarterly period ended October 31, 1998

                        Commission file number 0-6319


                             JACOBSON STORES INC.
            (Exact name of registrant as specified in its charter)


                   Michigan                                  38-0686330
(State or other jurisdiction of incorporation              (IRS Employer 
              or organization)                         Identification Number)

                  3333 Sargent Road, Jackson, Michigan 49201 
                   (Address of principal executive offices,
                             including zip code)

                                (517) 764-6400
             (Registrant's telephone number, including area code)

                                Not Applicable
             (Former name, former address and former fiscal year,
                        if changed since last report)


              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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date.

                         Common Stock ($1 Par Value):
           5,788,209-2/3 Shares outstanding as of October 31, 1998


<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES


                                  FORM 10-Q

                      For Quarter Ended October 31, 1998


                                    INDEX


                                                                         Page
PART I:       FINANCIAL INFORMATION

   Item 1.    Financial Statements

              .   Consolidated Balance Sheets - October 31, 1998 and
                  January 31, 1998                                          1

              .   Consolidated Statements of Earnings - Thirteen and 
                  Thirty-Nine Week Periods Ended October 31, 1998 and 
                  October 25, 1997                                          2

              .   Consolidated Statements of Cash Flows - Thirty-Nine
                  Week Periods Ended October 31, 1998 and October 25, 1997  3

              .   Notes to Consolidated Financial Statements                4

              Review by Independent Public Accountants                      7

              Exhibit:

              .   Report of Independent Public Accountants                  8

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

   Item 3.    Quantitative and Qualitative Disclosures About Market Risk   13

PART II:      OTHER INFORMATION

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

                  All items except those set forth above are 
                  inapplicable and have been omitted.


SIGNATURES                                                                 15

INDEX OF EXHIBITS                                                          16


<PAGE>

<TABLE>
<CAPTION>
              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES


                         CONSOLIDATED BALANCE SHEETS
                                (in thousands)
                                 (unaudited)

                                               October 31,      January 31,
ASSETS                                            1998             1998
                                               -----------      -----------
<S>                                            <C>               <C>      
CURRENT ASSETS:
    Cash and cash equivalents                  $   3,980         $   3,883
    Receivables from customers, net               28,953            34,124
    Merchandise inventories                      105,044            86,075
    Prepaid expenses and other assets              1,176             1,333
    Deferred taxes                                 3,696             3,696
                                               ---------         ---------

              Total current assets               142,849           129,111
                                               ---------         ---------
PROPERTY AND EQUIPMENT, NET                       84,085            83,707
                                               ---------         ---------
OTHER ASSETS                                      20,495            20,461
                                               ---------         ---------
                                               $ 247,429         $ 233,279
                                               =========         =========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Current portion of long-term debt          $   2,318         $   3,972
    Accounts payable                              41,671            32,108
    Accrued expenses                              15,105            13,856
    Accrued income taxes                              --               360
                                               ---------         ---------
              Total current liabilities           59,094            50,296
                                               ---------         ---------
LONG-TERM DEBT                                   118,060           104,138
                                               ---------         ---------
DEFERRED TAXES                                     2,154             5,262
                                               ---------         ---------
OTHER LIABILITIES                                  4,172             4,382
                                               ---------         ---------
SHAREHOLDERS' EQUITY:
    Common stock                                   5,975             5,966
    Paid-in surplus                                7,201             7,109
    Retained earnings                             51,172            56,525
    Treasury stock                                  (399)             (399)
                                               ---------         ---------
                                                  63,949            69,201
                                               ---------         ---------
                                               $ 247,429         $ 233,279
                                               =========         =========
<FN>
       The accompanying notes are an integral part of these statements.
</TABLE>


                                    - 1 -

<PAGE>

<TABLE>
<CAPTION>
              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES


                     CONSOLIDATED STATEMENTS OF EARNINGS
                     (in thousands except per share data)
                                 (unaudited)


                                                 Thirteen Weeks Ended          Thirty-Nine Weeks Ended
                                             ----------------------------     --------------------------
                                             October 31,      October 25,     October 31,    October 25,
                                                1998             1997            1998           1997
                                             -----------      -----------     -----------    -----------
<S>                                           <C>             <C>             <C>             <C>      
NET SALES                                     $  95,636       $  94,715       $ 305,717       $ 302,561
                                              ---------       ---------       ---------       ---------

COSTS AND EXPENSES:
    Cost of merchandise sold, buying and
        occupancy expenses                       63,099          59,587         206,045         204,282
    Selling, general and administrative
        expenses                                 35,165          34,421         102,759          98,782
    Interest expense, net                         1,881           2,148           5,807           6,885
    Store closing costs (credit)                     --              --              --            (340)
    Gain on sale of property                       (659)             --            (659)             --
                                              ---------       ---------       ---------       ---------

           Total costs and expenses              99,486          96,156         313,952         309,609
                                              ---------       ---------       ---------       ---------

EARNINGS (LOSS) BEFORE INCOME
   TAXES                                         (3,850)         (1,441)         (8,235)         (7,048)

PROVISION (CREDIT) FOR INCOME
    TAXES                                        (1,347)           (504)         (2,882)         (2,467)
                                              ---------       ---------       ---------       ---------


NET EARNINGS (LOSS)                           $  (2,503)      $    (937)      $  (5,353)      $  (4,581)
                                              =========       =========       =========       =========


EARNINGS (LOSS) PER COMMON SHARE:
    Basic and diluted                         $   (0.43)      $   (0.16)      $   (0.93)      $   (0.79)
                                              =========       =========       =========       =========
<FN>
       The accompanying notes are an integral part of these statements.
</TABLE>


                                    - 2 -

<PAGE>


<TABLE>
<CAPTION>
              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES


                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)
                                 (unaudited)

                                                               Thirty-Nine Weeks Ended
                                                              --------------------------
                                                              October 31,    October 25,
                                                                  1998          1997
                                                              -----------    -----------
<S>                                                            <C>            <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                   $ (5,353)      $ (4,581)
    Gain on sale of property                                       (659)            --
    Adjustments to reconcile net loss to cash provided
     by operating activities:
       Depreciation and amortization                              6,336          7,020
       Deferred taxes                                            (3,108)        (2,439)
       Other liabilities                                           (210)           430

       Change in:
          Receivables from customers, net                         5,171         10,913
          Merchandise inventories                               (18,969)        (2,049)
          Prepaid expenses and other assets                         157          1,475
          Accounts payable and accrued expenses                  10,812            443
          Current income taxes                                     (360)           754
                                                               --------       --------

                 Net cash provided by (used in) operating
                  activities                                     (6,183)        11,966
                                                               --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from sale of property                                1,163             --
    Additions to property and equipment                          (7,218)        (2,202)
    Other non-current assets                                        (34)           131
                                                               --------       --------

                 Net cash used in investing activities           (6,089)        (2,071)
                                                               --------       --------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Additions to long-term debt                                  15,559         49,500
    Reduction of long-term debt                                  (3,291)       (60,562)
    Proceeds of exercise of stock options                           101             --
                                                               --------       --------

                 Net cash provided by (used in)
                  financing activities                           12,369        (11,062)
                                                               --------       --------

INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                                         97         (1,167)

    Cash and cash equivalents, beginning of period                3,883          4,871
                                                               --------       --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                       $  3,980       $  3,704
                                                               ========       ========
<FN>
       The accompanying notes are an integral part of these statements.
</TABLE>


                                    - 3 -


<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (unaudited)


                      For Quarter Ended October 31, 1998




         The condensed consolidated financial statements included herein have
         been prepared by the Company without audit and reflect all
         adjustments which are, in the opinion of management, necessary to
         achieve a fair statement of results for the interim periods. All
         adjustments are of a normal and recurring nature.

         Because of the nature of the specialty department store business,
         the results for the thirty-nine week periods ended October 31, 1998
         and October 25, 1997 (which do not include the Christmas holiday
         season) are not indicative of the results for the year as a whole.

         Certain information in footnote disclosures normally included in
         financial statements prepared in accordance with generally accepted
         accounting principles has been condensed or amended, although the
         Company believes that the disclosures are adequate to make the
         information presented not misleading. It is suggested that these
         condensed consolidated financial statements be read in conjunction
         with the financial statements and notes to consolidated financial
         statements included in the Company's latest annual report on Form
         10-K.

   (1)   STORE CLOSING COSTS/GAIN ON SALE OF PROPERTY

         In March 1997, the Company closed under-performing stores in
         Jackson, Kalamazoo and Dearborn, Michigan. The Company incurred a
         $4,200,000 pre-tax charge in fiscal 1996 to effect the closings and
         to state property and equipment at estimated fair value. For the
         thirty-nine weeks ended October 31, 1998, store closing reserve
         activity was as follows:

<TABLE>
<CAPTION>
         (in thousands)
         -----------------------------------------------------
<S>                                                  <C>      
         Reserve at January 31, 1998                 $   2,623
         Reserve related to property sold               (1,630)
         Payments against reserve                         (237)
                                                     ---------
         Reserve at October 31, 1998                 $     756
                                                     =========
</TABLE>


                                    - 4 -


<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (unaudited)


                      For Quarter Ended October 31, 1998


         At October 31, 1998, $605,000 of the store closing reserve is
         attributable to property and equipment and is reflected as a
         reduction of property and equipment on the consolidated balance
         sheets. The balance of the store closing reserve is included in
         accrued expenses and represents estimated expense to hold closed
         facilities pending disposition.

         In the quarter ended October 31, 1998, the Company sold its former
         Kalamazoo, Michigan store at an after-tax gain of $428,000.

   (2)   EARNINGS PER SHARE

         Basic earnings per share are computed by dividing reported earnings
         available to common shareholders by weighted average common shares
         outstanding. Diluted earnings per share give effect to potential
         common shares represented by stock options and the Company's 6-3/4%
         Convertible Subordinated Debentures due 2011, except if
         anti-dilutive. Earnings per common share are calculated as follows:

<TABLE>
<CAPTION>
                                                      Thirteen Weeks        Thirty-Nine Weeks
                                                   -------------------     --------------------
         (dollars and shares in thousands)           1998        1997        1998       1997
         --------------------------------------------------------------------------------------

<S>                                                <C>         <C>         <C>         <C>     
         Net loss                                  $(2,503)    $  (937)    $(5,353)    $(4,581)
                                                   =======     =======     =======     =======

         Weighted average common shares
             outstanding                             5,788       5,779       5,783       5,779
         Dilutive stock options                         45          65         166          16
                                                   -------     -------     -------     -------

               Shares used to calculate diluted
                  loss per common share              5,833       5,844       5,949       5,795
                                                   =======     =======     =======     =======

         Loss per common share:
               Basic and diluted                   $ (0.43)    $ (0.16)    $ (0.93)    $ (0.79)
                                                   =======     =======     =======     =======
</TABLE>

   (3)   CUSTOMER CREDIT AND RECEIVABLES

         Receivables from customers were as follows:

<TABLE>
<CAPTION>
                                                 October 31,    January 31,
         (in thousands)                             1998           1998
         ------------------------------------------------------------------
<S>                                                <C>            <C>    
         Receivables from customers                $29,424        $34,761
         Less reserve for doubtful accounts            471            637
                                                   -------        -------

                                                   $28,953        $34,124
                                                   =======        =======
</TABLE>

                                    - 5 -


<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (unaudited)


                      For Quarter Ended October 31, 1998



    (4)  MERCHANDISE INVENTORIES

         Merchandise inventories were as follows:
<TABLE>
<CAPTION>
                                                              October 31,     January 31,
         (in thousands)                                          1998            1998
         --------------------------------------------------------------------------------
<S>                                                            <C>             <C>     
         Inventories at first-in, first out (FIFO) cost        $124,566        $104,708
         Less LIFO reserves                                      19,522          18,633
                                                               --------        --------

                                                               $105,044        $ 86,075
                                                               ========        ========
</TABLE>

   (5)   PROPERTY AND EQUIPMENT


         Property and equipment are set forth below:
<TABLE>
<CAPTION>
                                                              October 31,     January 31,
         (in thousands)                                          1998            1998
         --------------------------------------------------------------------------------
<S>                                                            <C>             <C>     
         Property and equipment                                $175,722        $171,808
         Less accumulated depreciation and amortization          91,637          88,101
                                                               --------        --------

                                                               $ 84,085        $ 83,707
                                                               ========        ========
</TABLE>

   (6)   STOCK OPTIONS

         At their Annual Meeting on May 28, 1998, the Company's shareholders
         approved an amendment to the Jacobson Stock Option Plan of 1994
         which increased the available shares under the plan to 1,400,000
         shares.

   (7)   PREFERRED STOCK PURCHASE RIGHTS

         On August 27, 1998, the Board of Directors declared a dividend of
         one Series A Preferred Stock Purchase Right on each Common Share
         outstanding. The dividend was payable to shareholders of record on
         October 25, 1998 and is payable with respect to certain common
         shares issued thereafter. The Company also adopted a Rights
         Agreement, effective October 25, 1998, to replace an expiring Rights
         Plan, pursuant to which the Rights are issued. Each Right, when it
         becomes exercisable, entitles the registered holder to purchase from
         the Company one-hundredth of a share of Series A Preferred Stock at
         an exercise price of $100, subject to adjustment. The Company has
         reserved 100,000 shares of Series A preferred Stock for issuance on
         the exercise of the Rights. The Rights trade with the Company's
         Common Shares until they become exercisable, which occurs on the
         date of public announcement that any

                                    - 6 -

<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                        PART I: FINANCIAL INFORMATION

                      For Quarter Ended October 31, 1998

         person or group has acquired, or 10 days (or such later date as the
         Board of Directors may determine) after the commencement of, or
         public announcement of an intention to commence, an offer to acquire
         beneficial ownership of 20% or more of the Company's Common Shares
         (subject to certain exceptions, including an offer to buy all shares
         that is approved by the Company's disinterested directors). After
         the Rights become exercisable, each Right (except those of the
         acquiring person or group) will entitle the holder to purchase upon
         exercise of the Right, at the then current exercise price of the
         Right, Company Common Shares having an average market value of twice
         the current exercise price of the Right. Alternatively, if the
         Company is acquired in a merger or other business combination or if
         more than 50% of its assets or earning power are sold to an
         acquiring person or in a transaction in which all holders of Common
         Shares are not treated alike, each Right (except those of the
         acquiring person or group) will entitle the holder to purchase, upon
         exercise, at the then current exercise price of the Right, common
         shares of the acquiring company having an average market value of
         twice the current exercise price of the Right. The Rights may be
         redeemed by the Company for one cent per Right prior to the date a
         person or group acquires 20% or more of the Company's Common Shares,
         and will expire on October 25, 2008, unless extended or earlier
         redeemed by the Board of Directors.

   (8)   SUPPLEMENTARY CASH FLOW INFORMATION

         The Company considers all short-term investments with a maturity at
         date of purchase of three months or less to be cash equivalents.

         Interest paid (net of interest capitalized) totalled $5,328,000 and
         $6,524,000 in the thirty-nine week periods ended October 31, 1998
         and October 25, 1997, respectively. The Company paid income taxes
         totaling $652,000 in the thirty-nine week period ended October 31,
         1998 and received income tax refunds of $781,000 in the thirty-nine
         week period ended October 25, 1997.

   (9)   FINANCING

         In June 1998, the Company and the lender under its Revolving Credit
         Agreement amended the Agreement to extend the maturity date by one
         year to March 24, 2001. As amended, each year, beginning in 1999,
         the Company may request a one-year extension of the maturity date,
         subject to lender approval.

         REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS

         Arthur Andersen LLP, independent public accountants, have performed
         a limited review of the condensed consolidated financial statements
         for the thirty-nine week period ended October 31, 1998. Since they
         did not perform an audit, they express no opinion on the financial
         statements referred to above.

                                    - 7 -

<PAGE>



                                                                      EXHIBIT

                             ARTHUR ANDERSEN LLP




                   Report of Independent Public Accountants




To Jacobson Stores Inc.:

               We have reviewed the accompanying consolidated balance sheet
               of JACOBSON STORES INC. (a Michigan corporation) and
               subsidiaries as of October 31, 1998, and the related
               consolidated statements of earnings and cash flows for the
               thirty-nine week period then ended. These financial statements
               are the responsibility of the Company's management.

               We conducted our review in accordance with standards
               established by the American Institute of Certified Public
               Accountants. A review of interim financial information
               consists principally of applying analytical procedures to
               financial data and making inquiries of persons responsible for
               financial and accounting matters. It is substantially less in
               scope than an audit conducted in accordance with generally
               accepted auditing standards, the objective of which is the
               expression of an opinion regarding the financial statements
               taken as a whole. Accordingly, we do not express such an
               opinion.

               Based on our review, we are not aware of any material
               modifications that should be made to the consolidated
               financial statements referred to above for them to be in
               conformity with generally accepted accounting principles.

               We have previously audited, in accordance with generally
               accepted auditing standards, the consolidated balance sheet of
               Jacobson Stores Inc. and subsidiaries as of January 31, 1998,
               and the related consolidated statements of earnings,
               shareholders' equity and cash flows for the year then ended
               (not presented herein), and, in our report dated March 6,
               1998, we expressed an unqualified opinion on those
               consolidated financial statements. In our opinion, the
               information set forth in the accompanying consolidated balance
               sheet as of January 31, 1998, is fairly stated, in all
               material respects, in relation to the consolidated balance
               sheet from which it has been derived.



                                                      /s/ ARTHUR ANDERSEN LLP

Detroit, Michigan
November 13, 1998


                                    - 8 -

<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES


                        PART I: FINANCIAL INFORMATION

                      For Quarter Ended October 31, 1998



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

               The registrant, Jacobson Stores Inc., a Michigan corporation
               and successor to a business founded in 1868, offers
               distinctive apparel and accessories for women, men and
               children, as well as decorative accents for the home. The
               Company operates 24 specialty stores in Michigan, Indiana,
               Kansas, Kentucky, Ohio and Florida, catering to discerning
               customers with preferences for quality merchandise and
               personalized service provided by knowledgeable sales
               associates.

               The Company owns a substantial portion of the real property
               used in its business, primarily through its consolidated,
               wholly-owned real estate subsidiary, Jacobson Stores Realty
               Company ("Jacobson Realty"). The Company also has a
               consolidated wholly-owned finance subsidiary, Jacobson Credit
               Corp. ("Jacobson Credit"). As used in this report, the terms
               "registrant", "Company" and "Jacobson's" refer to Jacobson
               Stores Inc. and its subsidiaries unless the context indicates
               otherwise.

               Jacobson's operates in two regions and maintains separate
               staffs of buyers for each region in order to better respond to
               customers' lifestyles and merchandise preferences. The
               principal merchandising and distribution functions are
               performed through regional facilities. Functions common to all
               stores, such as management coordination, sales promotion, data
               processing and accounting, are centralized at the corporate
               headquarters in Jackson, Michigan.

         a.    OPERATING RESULTS: THIRTEEN WEEKS ENDED OCTOBER 31, 1998
               COMPARED TO THIRTEEN WEEKS ENDED OCTOBER 25, 1997

               Sales for the quarter ended October 31, 1998 totaled
               $95,636,000, an increase of 1.0% from 1997. By region, Midwest
               sales decreased 1.5% and Florida sales increased 7.5%. In
               management's opinion, third quarter sales results were
               adversely affected by heightened consumer anxiety due to the
               stock market volatility and cool weather arriving late this
               season. Additionally, Florida business was adversely affected
               by hurricane Georges, which closed five stores anywhere from
               one to two days.

               The Company's gross profit percentage decreased to 34.0% for
               the thirteen weeks this year from 37.1% in 1997, reflecting
               principally higher markdowns in the quarter this year and a
               favorable inventory shortage result recorded in the quarter
               last year.

               Selling, general and administrative expenses, expressed as a
               percentage of sales, increased to 36.8% in the quarter from
               36.3% one year ago. The increase is due primarily to higher
               sales promotion expense, partially offset by reduced benefit
               expense (pension and health care).

                                    - 9 -

<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                        PART I: FINANCIAL INFORMATION

                      For Quarter Ended October 31, 1998


               Interest expense, expressed as a percentage of sales,
               decreased to 2.0% for the quarter from 2.3% one year ago,
               primarily due to lower average borrowings under the revolving
               credit facility and other long-term debt.

               1998 net loss for the thirteen weeks totalled $2,503,000, or
               43 cents per common share, compared to $937,000, or 16 cents
               per common share, last year. As a percentage of sales, net
               loss was 2.6% in 1998 compared to 1.0% in 1997. 1998 results
               included an after-tax gain on sale of property totalling
               $428,000, or 7 cents per share.

         b.    OPERATING RESULTS: THIRTY-NINE WEEKS ENDED OCTOBER 31, 1998
               COMPARED TO THIRTY-NINE WEEKS ENDED OCTOBER 25, 1997

               Sales for the thirty-nine weeks ended October 31, 1998,
               totaled $305,717,000, an increase of 1.0% from 1997. Sales
               from comparable stores (excluding stores closed in 1997)
               increased 3.7%. By region, Midwest sales decreased 1.0% (3.1%
               increase in comparable stores) and Florida store sales
               increased 5.0%.

               The Company's gross profit percentage increased to 32.6% for
               the thirty-nine weeks this year from 32.5% in 1997, reflecting
               principally lower markdowns and higher markup this year,
               partially offset by a favorable inventory shortage result last
               year.

               Selling, general and administrative expenses, expressed as a
               percentage of sales, increased to 33.6% for the thirty-nine
               weeks from 32.6% one year ago. The increase is due primarily
               to higher sales promotion expense, partially offset by reduced
               benefit expense (pension and health care).

               Interest expense, expressed as a percentage of sales,
               decreased to 1.9% from 2.3% in 1997, primarily due to lower
               average borrowings under the revolving credit facility and
               other long-term debt.

               The Company established a $4,200,000 reserve in 1996 due to
               the closing of three under-performing stores in March 1997. In
               the thirty-nine weeks ended October 25, 1997, the Company
               recognized a $340,000 pre-tax credit to write-off the
               remaining severance and benefit reserves after all payments
               were made and to adjust the property and equipment reserve
               after sale of a portion of the related property at greater
               than the original estimated value.

               1998 net loss for the thirty-nine weeks totalled $5,353,000,
               or 93 cents per common share, compared to $4,581,000, or 79
               cents per common share, last year. As a percent of sales, net
               loss was 1.8% in 1998 compared to 1.5% in 1997. 1998 results
               included an after-tax gain on sale of property totalling
               $428,000, or 7 cents per share.

               Store closing promotions conducted at the three stores closed
               in March 1997 reduced the net loss for the thirty-nine weeks
               last year by $788,000, or 14 cents per share.

                                    - 10 -

<PAGE>


              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES


                        PART I: FINANCIAL INFORMATION

                      For Quarter Ended October 31, 1998



      c.       LIQUIDITY AND CAPITAL RESOURCES

               At October 31, 1998, the Company's current ratio was 2.42 to 1
               and working capital totaled $83,755,000, including $3,980,000
               of cash and cash equivalents. At January 31, 1998, the current
               ratio was 2.57 to 1 and working capital totaled $78,815,000,
               including $3,883,000 of cash and cash equivalents.

               The Company utilizes cash flows from operations and revolving
               credit line borrowings to fund its seasonal working capital
               needs. To support its present and planned working capital
               requirements, the Company has a $100,000,000 revolving credit
               facility under a Revolving Credit Agreement with a commercial
               lender. The revolving credit facility currently provides for
               borrowings of up to $80,000,000, subject to a borrowing base
               limitation and lender reserves. The Company may, at its
               option, increase the maximum available borrowings under the
               revolving credit facility to up to $100,000,000 in the
               aggregate, subject to the borrowing base limitation and lender
               reserves. As of October 31, 1998, the Company had borrowed
               $50,591,000 under this facility and had $29,409,000 of
               borrowing availability. For the thirty-nine weeks ended
               October 31, 1998, the daily weighted average interest rate on
               borrowings under the Revolving Credit Agreement was 8.1%. In
               June 1998, the Agreement was amended to extend the maturity
               date by one year to March 24, 2001. As amended, each year,
               beginning in 1999, the Company may request a one-year
               extension of the maturity date, subject to lender approval.

         d.    CASH FLOWS

               Cash and cash equivalents increased $97,000 in the thirty-nine
               weeks ended October 31, 1998, compared to a decrease of
               $1,167,000 in the thirty-nine weeks ended October 25, 1997.
               Cash flows are impacted by operating, investing and financing
               activities. In the thirty-nine weeks this year, cash used in
               operating activities totalled $6,183,000, compared to
               $11,966,000 provided in 1997, primarily due to planned earlier
               receipt of Fall merchandise this year coupled with slow sales
               versus reduced inventory and accounts receivable related to
               stores closed last year and a higher net loss this year. These
               changes were partially offset by increased payables this year
               and payments against store closing reserves in 1997.

               Investing activities used cash of $6,089,000 in the
               thirty-nine weeks this year compared to $2,071,000 used in
               1997. Capital expenditures totalled $7,218,000 in the first
               thirty-nine weeks of 1998 compared to $2,202,000 in the
               comparable 1997 period.


                                    - 11 -

<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES


                        PART I: FINANCIAL INFORMATION

                      For Quarter Ended October 31, 1998


               Financing activities provided cash of $12,369,000 in the
               thirty-nine weeks this year compared to $11,062,000 used last
               year. In the thirty-nine weeks in 1998, the addition to
               long-term debt reflects higher Revolving Credit borrowings.
               Reduction of long-term debt reflects purchase of $1,695,000 in
               principal amount of 6 3/4% Convertible Subordinated Debentures
               to satisfy the December 1998 sinking fund requirement and
               scheduled debt maturities. In March 1997, the Company borrowed
               $49,500,000 under its current Revolving Credit Agreement to
               repay the then outstanding principal balance under its former
               Credit Agreement. Also in the thirty-nine weeks in 1997,
               reduction of long-term debt reflects repayment of $1,908,000
               under the current Revolving Credit Agreement, a $5,642,000
               principal pre-payment on a mortgage obligation, purchase of
               $1,755,000 principal amount of 6 3/4% Convertible Subordinated
               Debentures to satisfy the annual sinking fund payment and
               scheduled debt maturities.

               The Company believes its cash flows from operations, along
               with its borrowing capacity and access to financial markets
               are adequate to fund its operations and debt maturities.

         e.    CORPORATE DEVELOPMENT

               The Company has no commitments for any new store locations at
               the present time. The Company reviews the performance of its
               less profitable stores from time to time to determine whether
               it would be in the Company's best interest to close any of
               these stores. Store closings could have a significant impact
               on the Company's sales, expenses and capital requirements and
               would likely entail additional significant one-time charges to
               effect the closing and to recognize any impairment of assets
               resulting from the closing decision.

               In 1997, the Company sold its Store for the Home in Grosse
               Pointe, Michigan. In July 1998, the Company consolidated
               operations in its existing Grosse Pointe apparel store.

               The Year 2000 issue results from early computer programming
               that used two digits rather than four to define the applicable
               year. If not corrected, this defect could, as we move to the
               Year 2000, result in systems failures or miscalculations
               leading to disruptions in a company's operation. The Company
               has taken actions to address this potential problem. In 1997,
               the Company established an internal task force which
               identified areas of concern, assigned a risk factor and
               priority to each area and evaluated the Company's hardware,
               software and devices using embedded chips. After completing
               this evaluation, it developed specific action plans to fix or
               replace all non-compliant software and hardware that could
               pose a significant risk to the Company's operations.



                                    - 12 -

<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES


                        PART I: FINANCIAL INFORMATION

                      For Quarter Ended October 31, 1998


               The substantial majority of costs to replace non-compliant
               systems with Year 2000-compliant systems software and hardware
               would have been incurred regardless of the Year 2000 issue to
               meet current business needs and take advantage of new lower
               cost technology platforms. The Company expects to spend
               approximately $800,000 in programming costs, primarily in 1998
               and 1999, to make current systems Year 2000-compliant and to
               integrate them with new purchased software systems, of which
               approximately $200,000 had been spent through October 31,
               1998. The work is being performed principally by internal
               staff, most of which are existing staff. The Company cannot
               reasonably measure the portion of these costs attributable
               solely to Year 2000 remediation versus work related to new
               systems. As a contingency measure, some non-compliant systems
               scheduled for replacement will be made Year 2000-compliant to
               ensure that the Company has compliant systems in the event
               that new systems aren't ready timely. This cost is included in
               the above estimate. The Company is scheduled to have Year
               2000-compliant systems tested and implemented by September
               1999.

               The Company has requested Year 2000 compliance certification
               from its hardware and software vendors and from key
               merchandise vendors to obtain assurance that they have
               addressed Year 2000 issues that might disrupt the Company's
               operations or merchandise flow. The Company is evaluating the
               responses and will develop contingency plans as necessary to
               avoid merchandise flow problems or other disruptions to its
               business.

               Each of the above statements regarding future revenues,
               expenses or business plans (including statements regarding the
               sufficiency of the Company's capital resources to fund future
               operations) may be a "forward looking statement" within the
               meaning of the Securities Exchange Act of 1934. Such
               statements are subject to important factors and uncertainties
               that could cause actual results to differ materially from
               those in the forward-looking statement, including the
               continued support of the Company's trade creditors and
               factors, the risks inherent in the level of the Company's
               long-term debt compared to its equity, the risks inherent in
               the Year 2000 computer issue, the Company's ability to reduce
               its operating expenses, general trends in retail clothing
               apparel purchasing, especially during the Christmas season,
               and the factors set forth in this Management's Discussion and
               Analysis of Financial Condition and Results of Operations.

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

               Not applicable.


                                     -13-

<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

                          PART II: OTHER INFORMATION

                      For Quarter Ended October 31, 1998


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

   (a)     Exhibits

           10(a)  Executive Employment Agreement, dated as of July 6, 1998,
                  between Jacobson Stores Inc. and George P. Kelly
           15     Letter from Independent Public Accountants
           27     Financial Data Schedule

   (b)     Reports on Form 8-K

           During its fiscal quarter ended October 31, 1998, on October
           26, 1998, the Company filed a current Report on Form 8-K,
           reporting in Item 5 the Company's declaration of a dividend of
           one Series A Preferred Stock Purchase Right on each
           outstanding common share of the Company outstanding at the
           close of business on October 25, 1998, to replace similar
           rights expiring on that date. The report also describes the
           new Rights. No financial statements were filed.

All exhibits except as set forth above have been omitted as not applicable or
not required.




                                     -14-

<PAGE>

              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES


                      For Quarter Ended October 31, 1998



                                  SIGNATURES

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





                                                JACOBSON STORES INC.
                                         -----------------------------------
                                                    (Registrant)



Date:     December 10   ,  1998     BY:     /s/  P. Gerald Mills
      ------------------                 ------------------------------------
                                         P. GERALD MILLS
                                         Chairman of the Board, President and
                                         Chief Executive Officer



Date:     December 10   ,  1998     BY:     /s/  Paul W. Gilbert
      ------------------                 ------------------------------------
                                         PAUL W. GILBERT
                                         Vice Chairman of the Board
                                         (Principal Financial Officer)




                                    - 15 -


<PAGE>


              JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES


                              INDEX OF EXHIBITS



   10(a)  Executive Employment Agreement, dated as of July 6, 1998, between
          Jacobson Stores Inc. and George P. Kelly
   15     Letter from Independent Public Accountants
   27     Financial Data Schedule



   All exhibits except as set forth above have been omitted as not
   applicable or not required.





                                     -16-