<PAGE>
 
                                   Form 10-Q

                                 UNITED STATES

                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-Q

(Mark One)
[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

                                      OR

[_] 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  0-5648

                        OSHMAN'S SPORTING GOODS,  INC.
            (Exact name of registrant as specified in its charter)

                DELAWARE                                  74-1031691
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(State or other jurisdiction of incorporation           (I.R.S. Employer
             or organization)                          Identification No.)

                     2302  MAXWELL  LANE,  HOUSTON,  TEXAS
                                     77023
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                   (Address of principal executive offices)
                                  (Zip Code)

                                (713)  928-3171
-------------------------------------------------------------------------------
             (Registrant's telephone number, including area code)

                                   NO CHANGE
-------------------------------------------------------------------------------
  (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,  $1.00  par  value                   5,827,249
     ---------------------------------                   ---------
<PAGE>
 
                        PART I -- FINANCIAL INFORMATION
<PAGE>
 
ITEM 1 - FINANCIAL STATEMENTS

 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
            OCTOBER 31, 1998, JANUARY 31, 1998 AND NOVEMBER 1, 1997
                                (IN THOUSANDS)
<TABLE> 
<CAPTION> 

                                                             OCTOBER 31,    JANUARY 31,    NOVEMBER 1,
                                                                1998           1998           1997
                                                             -----------    -----------    -----------
                                                             (UNAUDITED)                   (UNAUDITED)
                 ASSETS
<S>                                                          <C>            <C>            <C> 
CURRENT ASSETS
  CASH AND CASH EQUIVALENTS                                      352            363            491
  ACCOUNTS RECEIVABLE, LESS ALLOWANCE OF         
    $130 OCT 98, $130 JAN 98 AND $225 NOV 97                   1,123          1,729          1,517
  MERCHANDISE INVENTORIES                                    109,921         99,874        117,270
  PREPAID EXPENSES AND OTHER                                   3,792          2,838          2,715
                                                            --------        -------        ------- 
          TOTAL CURRENT ASSETS                               115,188        104,804        121,993
                                                 
PROPERTY, PLANT AND EQUIPMENT, AT COST                        90,770         91,957         94,336
    LESS ACCUMULATED DEPRECIATION AND            
      AMORTIZATION                                            51,836         48,755         49,678
                                                            --------        -------        ------- 
          NET PROPERTY, PLANT AND EQUIPMENT                   38,934         43,202         44,658
                                                 
OTHER ASSETS                                                     308            344            363
                                                            --------        -------        ------- 
                                                             154,430        148,350        167,014
                                                            ========        =======        ======= 
          LIABILITIES AND STOCKHOLDERS' EQUITY             
CURRENT LIABILITIES                              
  CURRENT MATURITIES OF LONG-TERM OBLIGATIONS                      0            566            646
  TRADE ACCOUNTS PAYABLE                                      44,392         42,367         47,331
  ACCRUED LIABILITIES                                         14,960         17,141         16,148
  INCOME TAXES                                                    43             73             45
  STORE CLOSING RESERVE                                        2,539          3,852          4,242
                                                            --------        -------        ------- 
          TOTAL CURRENT LIABILITIES                           61,934         63,999         68,412
                                                 
LONG-TERM OBLIGATIONS                                         44,124         35,953         57,429
                                                 
OTHER NONCURRENT LIABILITIES                                   6,744          7,085          5,475
                                                 
STOCKHOLDERS' EQUITY                             
  COMMON STOCK                                                 5,830          5,830          5,830
  ADDITIONAL CAPITAL                                           4,211          4,177          4,153
  RETAINED EARNINGS                                           31,608         31,327         25,736
  LESS TREASURY STOCK, AT COST                                   (21)           (21)           (21)
                                                            --------        -------        ------- 
          STOCKHOLDERS' EQUITY                                41,628         41,313         35,698
                                                            --------        -------        ------- 
                                                             154,430        148,350        167,014
                                                            ========        =======        ======= 
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
<PAGE>
 
       OSHMAN'S SPORTING GOODS, INC, AND SUSIDIARIES
           CONSOLIDATED STATEMENTS OF OPERATIONS
           FOR THE QUARTER AND NINE MONTHS ENDED
           OCTOBER 31, 1998 AND NOVEMBER 1, 1997
           (in thousands, except per share data)
                      (UNAUDITED)
<TABLE>
<CAPTION>
                                                                Three Months Ended             Nine Months Ended
                                                               1998            1997           1998            1997
                                                               ----            ----           ----            ----    
<S>                                                          <C>             <C>            <C>             <C> 
 
      NET SALES                                              $64,312         $69,608        $215,484         $240,953
                                                                                                            
      COST OF GOODS SOLD                                      40,233          43,971         139,178          156,986
                                                             -------         -------        --------         --------
                                                                                                            
                 GROSS PROFIT                                 24,079          25,637          76,306           83,967
                                                                                                            
      OPERATING EXPENSES                                                                                    
        SELLING AND ADMINISTRATIVE EXPENSES                   26,095          27,266          78,714           87,252
        PRE-OPENING EXPENSES                                       -             885               -            1,087
        STORE CLOSING PROVISION                                   (1)              6            (500)            (682)
        MISCELLANEOUS INCOME                                    (311)            (15)         (4,149)          (3,021)
                                                             -------         -------        --------         --------  
                 OPERATING INCOME(LOSS)                       (1,704)         (2,505)          2,241             (669)
                                                                                                            
      INTEREST EXPENSE, NET                                      735             406           2,549            2,579
                                                             -------         -------        --------         -------- 
      EARNINGS(LOSS) BEFORE INCOME TAXES AND                                                                
      CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING                                                             
      METHOD FOR PRE-OPENING EXPENSES                         (2,439)         (2,911)           (308)          (3,248)
                                                                                                            
      INCOME TAX EXPENSE (BENEFIT)                              (423)         (4,108)           (589)          (4,029)
                                                             -------         -------        --------         -------- 
                                                                                                            
      EARNINGS(LOSS) BEFORE CUMULATIVE EFFECT                                                               
      OF CHANGE IN ACCOUNTING METHOD FOR                                                                    
      PRE-OPENING EXPENSES                                    (2,016)          1,197             281              781
                                                                                                            
      CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING                                                             
      METHOD FOR PRE-OPENING EXPENSES                              -               -               -           (1,299)
                                                             -------         -------        --------         -------- 
                                                                                                            
      NET EARNINGS/(LOSS)                                    $(2,016)        $ 1,197        $    281         $   (518)
                                                             =======         =======        ========         ========  
 
      EARNINGS(LOSS) PER SHARE
        EARNINGS(LOSS) BEFORE CUMULATIVE EFFECT
        OF CHANGE IN ACCOUNTING METHOD FOR
        PRE-OPENING EXPENSES
         BASIC EARNINGS(LOSS) PER SHARE                      $  (.35)        $   .21        $    .05         $    .13
                                                             =======         =======        ========         ========  
         DILUTED EARNINGS(LOSS) PER SHARE                    $  (.35)        $   .20        $    .05         $    .13
                                                             =======         =======        ========         ========  
        CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
        METHOD FOR PRE-OPENING EXPENSES
         BASIC EARNINGS(LOSS) PER SHARE                      $     -         $     -        $      -         $   (.22)
                                                             =======         =======        ========         ========  
         DILUTED EARNINGS(LOSS) PER SHARE                    $     -         $     -        $      -         $   (.22)
                                                             =======         =======        ========         ========  
        NET EARNINGS(LOSS)
         BASIC EARNINGS(LOSS) PER SHARE                      $  (.35)        $   .21        $    .05         $   (.09)
                                                             =======         =======        ========         ========  
         DILUTED EARNINGS(LOSS) PER SHARE                    $  (.35)        $   .20        $    .05         $   (.09)
                                                             =======         =======        ========         ========  
        WEIGHTED AVERAGE SHARES OUTSTANDING                    5,830           5,830           5,830            5,830
        DILUTIVE EFFECT OF STOCK OPTIONS                           -             131             129                -
                                                             -------         -------        --------         --------  
                                                
         DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING           5,830           5,961           5,959            5,830
                                                             =======         =======        ========         ========  
</TABLE> 
       SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
        FOR THE NINE MONTHS ENDED OCTOBER 31, 1998 AND NOVEMBER 1, 1997
                                (in thousands)
                                  (UNAUDITED)
<TABLE> 
<CAPTION> 
                                                                                          1998               1997
                                                                                    -------------      -------------
<S>                                                                                    <C>                 <C> 
CASH FLOWS OF OPERATING ACTIVITIES:

  NET EARNINGS/(LOSS)                                                                  $    281           $   (518)

  ADJUSTMENTS TO RECONCILE NET CASH (USED)PROVIDED BY OPERATING ACTIVITIES:
    DEPRECIATION AND AMORTIZATION                                                        5,699               5,172
    CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE FOR PRE-OPENING COSTS                -               1,299
    CHARGE TO RESERVE FOR CORPORATE RESTRUCTURING, NET OF DEPRECIATION AND AMORTIZATION      -                  (1)
    CHARGE TO RESERVE FOR STORE CLOSINGS                                                (1,542)             (7,439)
    (RECOVERY) PROVISION FOR STORE CLOSINGS                                                  -              (1,312)
    STOCK OPTION AND BONUS PLAN EXPENSE                                                     34                  85
    GAIN ON DISPOSITION OF FIXED ASSETS                                                 (3,487)             (2,283)
    AMORTIZATION OF DEFERRED RENTAL ALLOWANCES                                            (341)               (269)
    CHANGES IN ASSETS AND LIABILITIES:           
      DECREASE IN ACCOUNTS RECEIVABLE                                                      606               2,527
      INCREASE IN MERCHANDISE INVENTORIES                                               (9,926)             (4,386)
      INCREASE IN PREPAID EXPENSES AND OTHER                                            (1,097)             (2,025)
      DECREASE IN OTHER ASSETS                                                               2                   - 
      INCREASE IN TRADE ACCOUNTS PAYABLE                                                 2,025               1,627
      DECREASE IN ACCRUED LIABILITIES                                                   (2,115)             (2,082)
      INCREASE IN OTHER NONCURRENT LIABILITIES                                               -                  89
      DECREASE IN INCOME TAXES                                                             (30)             (4,484)
                                                                                       -------            --------            
        NET CASH USED BY OPERATING ACTIVITIES                                           (9,892)            (14,000)
CASH FLOWS OF INVESTING ACTIVITIES:
  PROCEEDS FROM SALE OF FIXED ASSETS                                                        79                  21
  PURCHASE OF PROPERTY, PLANT AND EQUIPMENT                                             (1,759)             (5,980)
  PROCEEDS FROM DISPOSITION OF REAL ESTATE AND LEASEHOLDS                                3,820               2,681
  PROCEEDS FROM NOTE RECEIVABLE                                                             32                  33
  PROCEEDS FROM LANDLORDS                                                                  105               2,397
                                                                                       -------            -------- 
        NET CASH PROVIDED(USED) BY INVESTING ACTIVITIES                                  2,276                (848)
CASH FLOWS OF FINANCING ACTIVITIES:
  PAYMENTS OF LONG-TERM OBLIGATIONS                                                       (427)               (605)
  PROCEEDS FROM REVOLVING CREDIT FACILITY, NET                                           8,032              15,507
                                                                                       -------            -------- 
        NET CASH PROVIDED BY FINANCING ACTIVITIES                                        7,605              14,902

NET (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS                                        (11)                 54
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                           363                 437
                                                                                       -------            -------- 
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                             $   352            $    491
                                                                                       =======            ======== 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

CASH (RECEIVED)PAID DURING THE YEAR FOR
        INCOME TAXES                                                                   $  264             $     49
        INTEREST                                                                        2,460                3,332
NONCASH FINANCING ACTIVITIES:
   BORROWINGS UNDER THE REVOLVING CREDIT FACILITY
    TO SETTLE LONG-TERM OBLIGATIONS                                                    $3,100             $      -
</TABLE> 

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
 
                OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     OCTOBER 31, 1998 AND NOVEMBER 1, 1997
                                  (UNAUDITED)


NOTE A

The financial statements are condensed and should be read in conjunction with
the 1997 annual report. The financial information contained herein is unaudited,
but in the opinion of the management of the Company, includes all adjustments
(consisting of normal recurring adjustments) for a fair presentation of the
results of operations for the periods indicated. The results for the nine months
ended October 31, 1998 are not necessarily indicative of the results to be
expected for the full year.


NOTE B

In fiscal 1997, the Company changed its method of accounting for pre-opening
expenses from amortizing such expenses against earnings over a one year period
subsequent to the new store opening to charging such expenses to expense as they
occur. The cumulative effect to periods prior to February 2, 1997 was
$1,299,000. The first three quarters of fiscal 1997 have been restated to
reflect the change in the method of accounting for pre-opening expenses
resulting in a net reduction of $837,000 to previously reported results for the
first nine months of 1997.
<PAGE>
 
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

The following table sets forth selected statements of operations data of the
Company expressed as a percentage of net sales for the periods indicated:


<TABLE>
<CAPTION>
                                                                          PERCENTAGE OF NET SALES
                                             ------------------------------------------------------------------------------
                                                           3RD QUARTER                              NINE MONTHS
                                             -------------------------------------     ------------------------------------
                                                    1998                 1997                 1998                 1997
                                             ---------------      ---------------      ---------------      ---------------   
<S>                                             <C>                  <C>                  <C>                  <C>
 
Net sales                                         100.0                  100.0                100.0                100.0
Cost of goods sold                                 62.6                   63.2                 64.6                 65.2
                                                  -----                  -----                -----                -----  
     Gross profit                                  37.4                   36.8                 35.4                 34.8
Operating expenses                                            
     Selling and administrative expenses           40.6                   39.2                 36.5                 36.2
     Pre-opening expenses                             -                    1.3                    -                   .5
     Store closing provision                          -                      -                  (.2)                 (.3)
     Miscellaneous income                           (.5)                     -                 (1.9)                (1.3)
                                                  -----                  -----                -----                -----  
          Operating income (loss)                  (2.6)                  (3.6)                 1.0                  (.3)

Interest expense, net                               1.1                     .6                  1.2                  1.1
                                                  -----                  -----                -----                -----  
Earnings (loss) before income taxes and                       
cumulative effect of change in accounting                     
method for pre-opening expenses                    (3.8)                  (4.2)                 (.1)                (1.3)
Income taxes                                        (.7)                  (5.9)                 (.3)                (1.7)
                                                  -----                  -----                -----                -----  
Earnings (loss) before cumulative effect of                   
change in accounting method for pre-opening                   
expenses                                           (3.1)                   1.7                   .1                   .3
Cumulative effect of change in accounting                     
method for pre-opening expenses                       -                      -                    -                  (.5)
                                                  -----                  -----                -----                -----  
Net earnings (loss)                                (3.1)                   1.7                   .1                  (.2)
                                                  =====                  =====                =====                ===== 
 </TABLE>
<PAGE>
 
Net sales for the third quarter of fiscal 1998 decreased 7.6% to $64.3 million
compared to $69.6 million in the third quarter of fiscal 1997. The net reduction
in sales is primarily attributable to a comparable store sales decline of 8.3%
($5.3 million) in continuing stores. Net sales for the first nine months of
fiscal 1998 decreased 10.6% to $215.5 million compared to $241.0 million in the
first nine months of fiscal 1997. The net reduction in sales is attributable
primarily to lost sales from stores closed in fiscal 1997 ($27.9 million) and a
comparable store sales decline of 6.0% in continuing stores. Management
attributes the decline in comparable store sales to several factors, including
lower inventory levels related to the Company's efforts to increase margins and
improve inventory turnover rates, reduced advertising expenditures and increased
competitive pressures.

Cost of goods sold as a percentage of net sales was 62.6% and 64.6% respectively
in the quarter and nine months ending October 31, 1998 compared to 63.2% and
65.2% respectively in the same periods of fiscal 1997. The reduction in cost of
goods sold, as a percentage of net sales in the quarter and nine months ended
October 31, 1998, compared to the same periods of the previous year, is
primarily attributable to the Company's strategy to improve gross margins and
inventory productivity. In addition, reduced markdowns in the first quarter of
fiscal 1998, compared to the first quarter of the previous year, also
contributed to improved gross margins for the first nine months of fiscal 1998.

Selling and administrative expenses as a percentage of net sales were 40.6% and
36.5% respectively for the quarter and nine months ended October 31, 1998
compared to 39.2% and 36.2% respectively in the same periods of fiscal 1997. In
the quarter and nine months ending October 31, 1998, selling and administrative
expenses, as a percentage of sales, increased primarily due to lower sales as
discussed above. Comparable store selling and administrative costs, as well as
corporate overhead and distribution costs were reduced in both the third quarter
and first nine months of fiscal 1998 compared to fiscal 1997, however, the
reductions were not sufficient to overcome the effect of the lower sales levels.

In fiscal 1997, the Company changed its accounting method for pre-opening
expenses to charge such expenses against earnings as incurred. The cumulative
effect to periods prior to February 2, 1997 was $1.3 million. Results for the
third quarter and first nine months of fiscal 1997 have been restated to reflect
the new accounting method, resulting in a net reduction of $391,000 to
previously reported third quarter results and a net reduction of $837,000 to
previously reported results for the first nine months. No new stores were opened
in the first nine months of fiscal 1998.

Store closing provision was a benefit of $500,000 for the first nine months of
fiscal 1998 compared to a benefit of $682,000 in the same period of fiscal 1997.
The benefit in both years is related to management's re-evaluation of store
closing reserves for lease termination costs, leasehold and other asset
writeoffs and other incremental store closing costs.

Miscellaneous income for the first nine months of fiscal 1998 was $4.1 million
compared to $3.0 million in the same period of fiscal 1997. Fiscal 1998 includes
a gain of $3.5
<PAGE>
 
million from a sale of real estate that was not being used in the Company's
retail business. In fiscal 1997, miscellaneous income included gains from the
sale of leasehold interests of $2.3 million.

Net interest expense for the third quarter and first nine months of fiscal 1997
was reduced by interest income of $662,000 related to an income tax refund
discussed below. The decreased interest expense in fiscal 1998 is primarily
related to reduced interest rates and lower average borrowings in fiscal 1998
under the Company's credit facility.

Income tax (benefit) in fiscal 1998 includes a benefit of $467,000 and $686,000
respectively in the third quarter and first nine months related to a refund of
prior years Federal income taxes. In fiscal 1998, net operating loss
carryforwards are expected to be realized, resulting in no Federal income tax
expense. Income tax (benefit) in fiscal 1997 includes a benefit of $4.1 million
related to a refund of prior years Federal income taxes.

In the first nine months of fiscal 1998, the Company had a pretax loss of
$308,000 compared to a loss of $3.2 million before income taxes and cumulative
effect of change in accounting method for pre-opening expenses in the same
period in fiscal 1997. The improved results in fiscal 1998 compared to fiscal
1997 are primarily attributable to,(i) improved results from continuing
operations, primarily due to an improved gross margin rate as a percentage of
sales, (ii) reduced costs related to stores opened in fiscal 1997 and (iii) the
increased gain from sale of real estate in fiscal 1998 over the gain from
disposition of leasehold interests in fiscal 1997.

LIQUIDITY AND CAPITAL RESOURCES

In the first nine months of fiscal 1998, operating activities used cash totaling
$9.9 million. Investing activities provided cash of $2.3 million as a result of
a sale of real estate for $3.8 million, offset by $1.8 million used for the
purchase of property, plant and equipment.  Financing activities provided net
cash of $7.6 million through the utilization of the Company's credit facility.
In the first quarter of fiscal 1998, the Company, at its option and without
penalty, pre-paid a $3.1 million mortgage note secured by land and a building
where it operates a SuperSports USA megastore.

Merchandise inventories increased to $109.9 million from $99.9 million at the
beginning of the fiscal year, however decreased 6.3% from $117.3 million at the
end of the third quarter of fiscal 1997.  The increase compared to the beginning
of the fiscal year is primarily related to normal seasonal fluctuations in
anticipation of the Christmas selling season. Comparable store inventories were
reduced approximately  4% from year ago levels primarily as a result of the
Company's strategy to improve inventory productivity by lowering average
inventory levels and improving turnover rates.

Net additions to property, plant and equipment of $1.8 million during the first
nine months of fiscal 1998 were related primarily to renovations and
refurbishment in existing locations.  The Company does not expect to open any
new stores in fiscal 1998, however, it has signed leases for three new store
locations, one of which is expected to open in 
<PAGE>
 
March of 1999. The Company has closed three traditional stores during the first
nine months of fiscal 1998 and expects to close an additional four traditional
stores by the end of the year.

The Company's primary source of liquidity in the first nine months of fiscal
1998 was the Company's credit facility, under which average borrowings were
$41.0 million compared to $44.9 million in the first nine months of fiscal 1997.
Long-term obligations increased to $44.1 million from $36.0 million at the
beginning of the fiscal 1998 as the Company utilized its credit facility to meet
its working capital requirements. In May 1998, the Company sold land and a
building in California, which had been leased to a third party, for $3.8 million
in cash. The Company believes that its revolving credit facility together with
cash provided by operations will be adequate to meet anticipated capital needs
for fiscal 1998.

YEAR 2000 ISSUE

The year 2000 issue is the result of computer programs written using two digits
rather than four to define the applicable year.  Without corrective actions,
programs with time-sensitive software would potentially recognize a date ending
in "00" as the year 1900 rather than the year 2000, causing many computer
applications to fail or create erroneous results and potentially causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
practices.

During fiscal 1996, the Company completed the installation of new financial
accounting and reporting systems and payroll and human resources systems, and in
fiscal 1997 the Company installed new sales audit software. The Company also
installed a new IBM AS400 computer in fiscal 1997 to accommodate the new systems
and those to be installed in 1998. During fiscal 1998, the Company upgraded its
personal computers making them year 2000 compliant. In addition, the Company is
presently in the process of installing new merchandising information and
inventory management systems, which are expected to be implemented by the end of
fiscal 1998. When installation of these systems is complete, the Company will
have updated substantially all of its computer systems and software to
accommodate the year 2000 and beyond. The Company is continuing to test these
systems, and expects to finalize testing once upgrades are installed in fiscal
1999. Cumulatively, capital costs of approximately $3.9 million have been
incurred for the purchase and installation of hardware and software related to
the year 2000 issue. The Company does not expect future expenditures related to
the year 2000 issue to be significant for its internal systems.

The Company presently believes that upon completion of its installation of
computer hardware and software systems described above, the Year 2000 issue will
have been adequately addressed with respect to all of the Company's internal
computer systems.  Any failure of the Company's systems to be timely compliant,
however, could have a material and adverse impact on the business and operations
of the Company.
<PAGE>
 
The Company is continuing to review and assess its non-information technology
systems, and has contacted vendors to uncover any potential year 2000 problems.
At this time, the Company is not aware of any compliance problems from its non-
information technology systems that could have a material effect on the
Company's operation.

In addition to its internal computer and non-information technology systems, the
Company may face risks to the extent that suppliers of products, services and
systems purchased by the Company and others with whom the Company transacts
business do not have business systems or products that comply with the year 2000
requirements.  The Company is currently assessing the year 2000 compliance of
its major providers of products, services and systems through the use of surveys
and formal communications.  However, there can be no assurance that the Company
can correctly assess the year 2000 readiness of all its major suppliers.  In the
event that any such third parties cannot timely provide the Company with
products, services or systems as a result of any such non-compliance, the
Company's operating results could be materially adversely affected.

The Company is developing contingency plans for its internal computer and non-
information technology systems, as well as for failure of its key suppliers to
perform.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

The information discussed herein includes "forward-looking statements" within
the meaning of the federal securities laws.  Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable,
the Company's actual results could differ materially as a result of certain
factors, including: the Company's ability to manage its expansion efforts in
existing and new markets, availability of suitable new store locations at
acceptable terms, levels of discretionary consumer spending, availability of
merchandise to meet fluctuating consumer demands, customer response to the
Company's merchandise offerings, fluctuating sales margins, increasing
competition in sporting goods and apparel retailing, the results of financing
efforts and financial market conditions, as well as other factors described from
time to time in the Company's periodic reports filed with the Securities and
Exchange Commission.
<PAGE>
 
                         PART II -- OTHER INFORMATION
<PAGE>
 
                                  SIGNATURES


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

                                 OSHMAN'S SPORTING GOODS, INC.


Date: December 14, 1998          By:  /s/ A. Lynn Boerner
      ____________________            ____________________________
                                       A. Lynn Boerner
                                       Vice-President and
                                       Chief Accounting Officer