SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C.  20549
                                                
                                   FORM 10-Q
                               QUARTERLY REPORT
                    PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                            
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996    
                                                COMMISSION FILE NUMBER:  0-3777

                       PETRIE STORES LIQUIDATING TRUST
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          NEW YORK                                     22-6679945  
        (STATE OR OTHER JURISDICTION OF              (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)               IDENTIFICATION NO.)

          70 ENTERPRISE AVENUE
          SECAUCUS, NEW JERSEY                          07094 
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)     (ZIP CODE)

          REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (201) 422-0496

          FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF
          CHANGED SINCE LAST REPORT: 

               N/A

               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:  As of November 11, 1996, there were
          52,350,238 Units of Beneficial Interest outstanding.


                       PETRIE STORES LIQUIDATING TRUST
                   (SUCCESSOR TO PETRIE STORES CORPORATION)

          INDEX TO FORM 10-Q

          PART I - FINANCIAL INFORMATION
                                                                      Page
          Item 1.  Financial Statements (unaudited) 
                   Statements of Net Assets in Liquidation - 
                      September 30, 1996 and January 22, 1996 . . .    2
                   Statements of Changes in Net Assets in
                      Liquidation - For the Three Months Ended 
                      September 30, 1996 and October 28, 
                      1995, the Period from January 23, 1996 to
                      September  30, 1996 and the Nine Months 
                      Ended October 28, 1995  . . . . . . . . . . .    3
                   Notes to Unaudited Financial Statements  . . .      4
          Item 2.  Management's Discussion and Analysis of
                      Financial Condition and Results of
                      Operations . . . . . . . . . . . . . . . . .    12

          PART II - OTHER INFORMATION

          Item 1.  Legal Proceedings  . . . . . . . . . . . . . .     16
          Item 6.  Exhibits and Reports on Form 8-K . . . . . . .     16


                        PETRIE STORES LIQUIDATING TRUST
                   (SUCCESSOR TO PETRIE STORES CORPORATION)

                    STATEMENTS OF NET ASSETS IN LIQUIDATION

                                (IN THOUSANDS)

                                                                
                                                 September 30,   January 22, 
                                                     1996        1996 (Pre-
                                                  (Unaudited)    decessor)
      Assets
      Cash and cash equivalents                  $  56,625     $ 63,647
      Cash and cash equivalents held in escrow      70,029       67,470

      Investments in common stock (including
        3,493,450 shares of Toys "R" Us 
        common stock held in escrow)               147,244      106,799
                                                  ________     ________
     Total assets                                  273,898      237,916

      Liabilities
      Accrued expenses and other liabilities        44,762       35,322

      Total liabilities                             44,762       35,322

      Commitments and contingencies              _________      _______

      Net assets in liquidation                  $ 229,136     $202,594
                                                 =========     ========

     See accompanying notes.


                        PETRIE STORES LIQUIDATING TRUST
                     (SUCCESSOR TO PETRIE STORES CORPORATION)

              STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION

                                 (UNAUDITED)
             (IN THOUSANDS, EXCEPT PER UNIT AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                                         Period From January
                                              Three Months Ended    Three Months Ended       23, 1996 to      Nine Months Ended
                                                September 30,        October 28, 1995       September 30,      October 28, 1995
                                                    1996             (Predecessor)              1996            (Predecessor)
                                              ------------------     -----------------   ------------------   ------------------

<S>                                               <C>                    <C>                  <C>              <C>       
Net assets in liquidation at beginning of
  period                                          $  225,070             $  340,524           $ 202,594        $  836,470
                                                  ----------             ----------           ---------        ----------

Investment income                                      1,760                    291               4,742               658
Corporate overhead                                     (854)                (17,681)            (18,645)          (20,433)

Net realized and unrealized gain (loss)
  on Toys "R" Us common stock                          3,160                (78,051)              40,445         (241,167)
                                                 -----------             ----------           ----------       -----------
Income (loss) before income tax credit                 4,066                (95,441)              26,542         (260,942)
Income tax credit                                        ---                 21,970                 ---            85,956
                                                ------------             ----------           ----------        ----------
Net income (loss) for the period                       4,066                (73,471)              26,542         (174,986)

Distribution of 5,235,035 and 31,408,753 shares,
respectively, of Toys "R" Us common stock,
      net of related deferred taxes                      ---               (85,168)                 ---         (479,599)
                                                ------------         --------------       -------------       -----------

Increase (decrease) in net assets                      4,066              (158,639)              26,542         (654,585)
                                                ------------         --------------          ----------       -----------
Net assets in liquidation at
  end of period                                  $   229,136           $    181,885           $ 229,136         $ 181,885
                                                 ===========           ============           =========         =========

Net income (loss) per unit or share              $      0.08           $   (1.40)             $  0.51          $ (3.34)
                                                  ============         ============           =========        ==========

Weighted average number of units
  or shares                                           52,350                 52,350              52,350            52,350
                                                ============          =============         ===========       ===========


See accompanying notes.

</TABLE>


                        PETRIE STORES LIQUIDATING TRUST
                   (SUCCESSOR TO PETRIE STORES CORPORATION)

     NOTES TO UNAUDITED FINANCIAL STATEMENTS

     SEPTEMBER 30, 1996

     1.   INTERIM REPORTING

          The accompanying unaudited financial statements of the Petrie
     Stores Liquidating Trust (the "Liquidating Trust") have been prepared
     in accordance with generally accepted accounting principles for
     interim financial information and with the instructions to Form 10-Q
     and Rule 10-01 of Regulation S-X.  Accordingly, they do not include
     all of the information and footnotes required by generally accepted
     accounting principles for complete financial statements.   In the
     opinion of the Liquidating Trust, all adjustments (consisting of only
     normal recurring accruals) considered necessary for a fair presenta-
     tion have been included.  Results for the period from January 23,
     1996 to September 30, 1996 are not necessarily indicative of the
     results that may be expected for the current fiscal year.   For
     further information, reference is made to the financial statements
     and footnotes thereto included in the Liquidating Trust's Annual
     Report on Form 10-K for the period ended January 22, 1996.

     2.   BASIS OF PRESENTATION

          The Liquidating Trust is the successor to Petrie Stores Corpora-
     tion ("Petrie").  Prior to December 9, 1994, Petrie operated a chain
     of retail stores that specialized in women's apparel and were located
     throughout the United States (including Puerto Rico and the U.S.
     Virgin Islands).   At Petrie's Annual Meeting, held on December 6,
     1994,  Petrie's shareholders approved the sale of Petrie's retail
     operations (the "Sale").   On December 9, 1994, pursuant to a Stock
     Purchase Agreement, dated as of August 23, 1994 and amended as of
     November 3, 1994 (the "Retail Operations Stock Purchase Agreement"),
     PS Stores Acquisition Corp. ("PS Stores") purchased all of the stock
     of Petrie Retail, Inc., a former subsidiary of Petrie to which all of
     Petrie's retail operations had been transferred ("Petrie Retail"). 
     At Petrie's Reconvened Annual Meeting, held on January 24, 1995,
     Petrie's shareholders approved (i) an exchange of shares of Toys "R"
     Us, Inc. ("Toys 'R' Us") common stock ("Toys Common Stock") with Toys
     "R" Us (Note 3) and (ii) the liquidation and dissolution of Petrie
     pursuant to a plan of liquidation and dissolution (the "Plan of
     Liquidation").  

          Pursuant to the Plan of Liquidation, and the Agreement and
     Declaration of Trust, dated as of December 6, 1995 (the "Liquidating
     Trust Agreement"), between Petrie and the trustees named therein (the
     "Liquidating Trustees"), effective as of the close of business on
     January 22, 1996 (the "Succession Date"), Petrie transferred its
     remaining assets (then consisting of approximately $131 million in
     cash and cash equivalents and 5,055,576 shares of Toys Common Stock) 
     to, and its remaining fixed and contingent liabilities were assumed
     by (the "Succession"), the Liquidating Trust.

          Since the Succession Date, Petrie has been preparing for its
     dissolution.  On November 6, 1996, Petrie submitted a Certificate of
     Dissolution with the New York State Department of Taxation and
     Finance.  The Certificate of Dissolution will be filed with the
     Secretary of State of the State of New York and become effective upon
     the receipt of all necessary consents and clearances.  Petrie is
     otherwise inactive.

          Beginning with the period ending December 31, 1996, the Liqui-
     dating Trust has adopted the calendar year as its fiscal year.  A
     liquidation basis of accounting was implemented as of January 28,
     1995.  The statements of net assets in liquidation at September 30,
     1996 and January 22, 1996 do not distinguish between current and
     long-term balances as would be reflected if such statements had been
     prepared on a going-concern basis. 

          The Liquidating Trust is a complete pass-through entity for
     federal income taxes and, accordingly, is not subject to income tax. 
     Instead, each holder of Units of Beneficial Interest in the Liquidat-
     ing Trust is required to take into account, in accordance with such
     holder's method of accounting, his pro rata share of the Liquidating
     Trust's items of income, gain, loss, deduction or credit, regardless
     of the amount or timing of distributions to such holder.

     3.   INVESTMENTS IN COMMON STOCK

          The Liquidating Trust's investments in common stock consist of
     shares, which are carried at market value, of Toys "R" Us, which
     operates a chain of specialty retail stores principally engaged in
     the sale of toys and children's clothing in the United States and
     abroad.

          On January 24, 1995, pursuant to the terms of an Acquisition
     Agreement dated as of April 20, 1994 and amended as of May 10, 1994
     (the "Toys Acquisition Agreement"), between Petrie and Toys "R" Us,
     Petrie exchanged (the "Exchange") with Toys "R" Us all of its shares
     of Toys Common Stock (39,853,403 shares), plus $165 million in cash,
     for 42,076,420 shares of Toys Common Stock (approximately 15.0% of
     the outstanding Toys Common Stock at January 28, 1995).

          Simultaneously with the closing of the Exchange, Petrie placed
     3,493,450 shares of its Toys Common Stock into an escrow account (the
     "Escrow Account") pursuant to the terms of an escrow agreement, dated
     as of January 24, 1995, between Petrie and Custodial Trust Company,
     as Escrow Agent (the "Escrow Agreement").  The shares of Toys Common
     Stock placed into the Escrow Account pursuant to the Escrow Agreement
     secure the payment of certain obligations of the Liquidating Trust,
     as successor to Petrie, to Toys "R" Us arising (i) under (x) the Toys
     Acquisition Agreement, (y) the Seller Indemnification Agreement,
     dated as of December 9, 1994, among Petrie, Toys "R" Us, Petrie
     Retail, PS Stores and certain subsidiaries of PS Stores and (z) the
     Retail Operations Stock Purchase Agreement and (ii) otherwise.

          Petrie had also placed 3,200,082 shares of Toys Common Stock in
     a collateral account (the "Collateral Account") pursuant to the terms
     of an Amended and Restated Cash Collateral and Pledge Agreement,
     dated as of December 9, 1994 and amended as of January 24, 1995,
     among Petrie, PS Stores, certain subsidiaries of PS Stores, and
     Custodial Trust Company, as Collateral Agent (the "Amended and
     Restated Cash Collateral Agreement").  On December 19, 1995, the
     Amended and Restated Cash Collateral Agreement was further amended
     and restated and, pursuant thereto, the 3,200,082 shares of Toys
     Common Stock held in the Collateral Account were released to Petrie
     in exchange for Petrie's deposit of $67.5 million in cash equivalents
     into the Collateral Account.  The cash equivalents and accrued
     interest thereon placed in the Collateral Account pursuant to the
     Amended and Restated Cash Collateral Agreement secure the payment of
     certain obligations of the Liquidating Trust, as successor to Petrie,
     to PS Stores arising under (i) the Retail Operations Stock Purchase
     Agreement and (ii) the Cross-Indemnification and Procedure Agreement,
     dated as of December 9, 1994, between Petrie and PS Stores (Note 4).

          The assets of the Liquidating Trust are subject to the terms of
     a letter agreement, dated as of January 24, 1995, pursuant to which
     Petrie agreed with Toys "R" Us that, until such time as a hedge or
     similar arrangement which would protect the value of the Toys Common
     Stock is in place, Petrie will retain, either individually or in
     combination, (i) cash in an amount of at least $177.5 million (the
     "Reserved Amount") or (ii) shares of Toys Common Stock having a
     market value (as of January 20, 1995) of at least twice the Reserved
     Amount, to secure the payment of Petrie's contingent liabilities
     (Note 4).  At November 11, 1996, the Liquidating Trust, as successor
     to Petrie, was required to retain substantially all of its assets.

          The price per share of Toys Common Stock, as reported by the New
     York Stock Exchange Composite Tape, increased from $28-1/2 per share
     at June 28, 1996 (the last business day prior to the end of the
     quarter ended June 30, 1996) to $29-1/8 per share at September 30,
     1996 .

     4.   COMMITMENTS AND CONTINGENCIES

          As successor to Petrie, the Liquidating Trust has certain
     contingent liabilities with respect to existing or potential claims,
     lawsuits and other proceedings, which primarily relate to (i) guaran-
     tees of certain retail store leases, expiring at various times
     through 2011, to which Petrie Retail or an affiliate thereof is a
     party, and certain other liabilities that were assumed by Petrie
     Retail (but as to which Petrie's liability has not been released) in
     connection with the Sale (collectively, the "Assumed Obligations") to
     the extent that Petrie Retail fails to perform, (ii) Petrie's agree-
     ment with Petrie Retail to indemnify it for certain liabilities
     relating to Petrie Retail's withdrawal from the United Auto Workers
     District 65 Security Plan Pension Fund (the "Multiemployer Plan") and
     (iii) an ongoing dispute with the Internal Revenue Service (the
     "IRS") relating to the manner in which Petrie computed the basis of
     shares of Toys Common Stock transferred in connection with the
     exchange of certain of Petrie's exchangeable subordinated debentures
     in fiscal year 1989.  The Liquidating Trust accrues liabilities when
     it is probable that future costs will be incurred and when such costs
     can be reasonably estimated.  Such accruals are based on developments
     to date, the Liquidating Trust's estimates of the outcome of these
     matters and its experience (including that of its predecessor,
     Petrie) in contesting, litigating and settling matters.  At September
     30, 1996, the Liquidating Trust, as successor to Petrie, has accrued
     approximately $42 million for contingent liabilities.  As the scope
     of these liabilities becomes better defined, there may be changes in
     the estimates of future costs, which could have a material effect on
     the Liquidating Trust's financial condition or liquidity.

          On October 12, 1995, Petrie Retail filed a voluntary petition
     for reorganization relief under Chapter 11 of the Federal Bankruptcy
     Code with the United States Bankruptcy Court for the Southern Dis-
     trict of New York (the "Bankruptcy Court").  As a result of its
     bankruptcy filing, Petrie Retail has failed to perform or make
     payment with respect to certain of the Assumed Obligations, includ-
     ing, but not limited to, Assumed Obligations relating to store leases
     to which Petrie Retail or an affiliate thereof is a party, state
     taxes, employment agreements and certain other claims and contractual
     obligations.  Accordingly, the Liquidating Trust has been and may
     continue to be required to make payments in respect of certain of the
     Assumed Obligations.  The Liquidating Trust intends to file a claim
     in the Bankruptcy Court against Petrie Retail in respect of any such
     payments.  Additionally, the Liquidating Trust intends to assert a
     right of setoff in respect of any such payments against any claims
     Petrie Retail and its affiliates may have against Petrie and the
     Liquidating Trust, as successor to Petrie.  The Liquidating Trust is
     unable to predict the timing or probability of the collection of
     these claims against Petrie Retail.  

          Since filing its petition for bankruptcy protection, Petrie
     Retail has closed approximately 600 of the roughly 1600 stores it
     operated prior to filing the petition, and in connection with the
     going-out-of-business sales described below (and the subsequent lease
     rejections), additional stores are expected to be closed.  Of the 600
     closed stores, 403 relate to rejected leases and the remainder of the
     leases generally have expired or were terminated by mutual landlord
     and tenant consent.  The Liquidating Trust, as successor to Petrie,
     is a guarantor of approximately 52 of the rejected leases and its
     aggregate guarantee liability on those leases is approximately $24
     million, which the Liquidating Trust, as successor to Petrie, has
     included in accrued expenses and other liabilities in the accompany-
     ing financial statements at September 30, 1996.  Such aggregate
     guarantee liability has been reduced by approximately $5 million to
     take into account settlement agreements entered into and releases
     obtained by the Liquidating Trust.  The Liquidating Trust's lease
     guarantee liability will be further reduced by, among other things,
     the extent to which new rent-paying tenants are found for the closed
     stores.

          During 1996, Petrie Retail has obtained approval from the
     Bankruptcy Court to conduct going-out-of-business sales at an aggre-
     gate of 615 stores.  Of the leases relating to such stores, 403 have
     been rejected (as discussed above), 53 have been terminated by mutual
     consent of the landlord and tenant, 21 have been assigned to new
     tenants and approximately 81 have expired  The Liquidating Trust
     expects that Petrie Retail will reject the remainder of these leases
     in the near future.  The Liquidating Trust, as successor to Petrie,
     is a guarantor of three of these remaining leases.  If Petrie Retail
     were to close all three of the stores under such leases, the Liqui-
     dating Trust's aggregate guarantee liability on these leases would be
     approximately $4 million, which amount has been included in the
     Liquidating Trust's accrued expenses and other liabilities at Septem-
     ber 30, 1996.

          No assurance can be given as to the number of additional stores
     to be closed by Petrie Retail with respect to which the Liquidating
     Trust has guarantee liability.   If Petrie Retail were to close every
     store for which the Liquidating Trust, as successor to Petrie,
     believes it has liability as a lease guarantor (giving effect to all
     the lease guarantee releases executed by landlords) and every store
     for which the Liquidating Trust disputes its guarantor liability (as
     more fully discussed in the following paragraph), assuming that no
     mitigation or defense were successful, the Liquidating Trust's
     theoretical exposure relating to such leases, without giving effect
     to any present value discount, would be approximately $115 million,
     with approximately $4 million coming due in the year ending December
     31, 1996, approximately $16 million due in 1997, approximately $15
     million due in 1998 and approximately $80 million due thereafter. 
     Such exposure includes the $24 million in aggregate liability relat-
     ing to the rejected leases and the $4 million in aggregate liability
     relating to the going-out-of-business sales described above.  As
     discussed below, landlords under leases relating to 135 stores (which
     number represents a reduction from the 146 stores previously report-
     ed) operated by Petrie Retail or an affiliate thereof have alleged in
     a complaint that the Liquidating Trust, as successor to Petrie, has
     liability as a guarantor of certain leases notwithstanding Petrie's
     receipt from these landlords of releases of guarantees with respect
     to such leases.  Based on the complaint, such alleged guarantor
     liability represents approximately $85 million in lease payments,
     without giving effect to any present value discount or rental pay-
     ments made by Petrie Retail since the complaint was filed and assum-
     ing that all of the 135 stores which are the subject of these
     landlords' claims are closed and that the landlord in each case is
     unable to mitigate its damages.  The Liquidating Trust believes it
     has substantial legal defenses to these landlords' claims and is
     vigorously contesting such claims.  Although the Liquidating Trust
     considers it unlikely, a decision by a court in favor of these
     landlords could have a material adverse effect on the Liquidating
     Trust's liquidity and financial condition.

          The amounts described in the preceding three paragraphs include
     amounts relating to a dispute between the Liquidating Trust, on the
     one hand, and Petrie Retail and its affiliates, on the other, as to
     whether the Liquidating Trust, as successor to Petrie, or Petrie
     Retail and its affiliates is responsible as guarantor of 43 leases. 
     The maximum theoretical exposure relating to such disputed leases
     (which exposure is included in the amounts described in the preceding
     three paragraphs), based on the same assumptions set forth in the
     three preceding paragraphs and without giving effect to any present
     value discount, would be approximately $29 million, with approximate-
     ly $1.5 million coming due in the year ending December 31, 1996,
     approximately $5 million due in 1997, approximately $4.5 million due
     in 1998 and approximately $18 million due thereafter.  The $24
     million accrual with respect to rejected leases includes $7.5 million
     in respect of 11 of the disputed leases which have been rejected.

           The Liquidating Trust's lease exposure calculations reflect the
     estimated sum of all base rent and additional rent (such as taxes and
     common area charges) due under a lease through the end of the current
     lease term, but do not reflect potential penalties, interest and
     other charges to which a landlord may be entitled.  Such additional
     charges (which may in part be unenforceable) are not expected to
     materially increase the Liquidating Trust's lease guarantee liability.

          A significant number of leases discussed above under which a
     landlord might claim that the Liquidating Trust, as successor to
     Petrie, has liability as a lease guarantor either expressly contain
     mitigation provisions or relate to property in states that imply such
     provisions as a matter of law.  Mitigation generally requires, among
     other things, that a landlord of a closed store seek to reduce its
     damages, including by attempting to locate a new tenant.

          On October 23, 1995, Petrie Retail notified two former execu-
     tives of Petrie (one of whom is a current director of Petrie) and the
     current President and Chief Executive Officer of Petrie (who is also
     a current director of Petrie) that, as a result of Petrie Retail's
     bankruptcy filing, Petrie Retail would no longer honor its obliga-
     tions under the employment agreements each executive had entered into
     with Petrie which had been assumed by Petrie Retail in connection
     with the sale of the retail operations.  On April 25, 1996, the
     Liquidating Trust, while preserving its rights against Petrie Retail,
     entered into settlement agreements with one of the former executives
     and the current President and Chief Executive Officer of Petrie. 
     Pursuant to the settlement agreements, the Liquidating Trust agreed
     to pay each substantially all the amounts due under their respective
     agreements with Petrie.  The total cost of these settlements to the
     Liquidating Trust was approximately $2.9 million (accrued for at
     January 22, 1996) of which approximately $2.0 million has been paid.

          Effective January 31, 1995, Petrie Retail withdrew from the
     Multiemployer Plan.  Due to underfunding of the Multiemployer Plan,
     Petrie Retail and its affiliates have incurred liability under the
     Employee Retirement Income Security Act of 1974, as amended.  By
     letter dated May 30, 1996, the Multiemployer Plan assessed withdrawal
     liability against Petrie Retail in the amount of approximately $9.4
     million plus interest, to be paid in quarterly installments of
     approximately $317,000 commencing August 1, 1996 through and includ-
     ing August 1, 2006, with a final payment of approximately $18,000 due
     on November 1, 2006.  In addition, the Multiemployer Plan assessed
     liability against Petrie Retail of approximately $2 million attribut-
     able to the Multiemployer Plan's failure to meet certain Internal
     Revenue Code minimum funding standards, which amount was payable on
     August 1, 1996.  To the knowledge of the Liquidating Trust, as of
     November 11, 1996, Petrie Retail has not yet paid any amounts for its
     liabilities in connection with the Multiemployer Plan.  In the event
     of a mass withdrawal by contributing employers from the Multiemployer
     Plan, the withdrawal liability allocated to Petrie Retail and its
     affiliates may be higher.  Pursuant to the Retail Operations Stock
     Purchase Agreement, Petrie Retail and its affiliates are responsible
     for the first $10 million in withdrawal and related liabilities, with
     the next $50 million of such liabilities allocated 75 percent to the
     Liquidating Trust, as successor to Petrie, and 25 percent to Petrie
     Retail and its affiliates.  It is unclear what effect, if any, Petrie
     Retail's bankruptcy filing may have upon the timing and amount of any
     payments the Liquidating Trust may be required to make under the
     agreement with respect to the Multiemployer Plan, but in no event
     does the Liquidating Trust believe that its maximum contractual
     liability will be increased as a result of Petrie Retail's bankruptcy
     filing.

          In connection with an audit being conducted by the IRS, the
     agent examining Petrie's federal tax return for its fiscal year ended
     January 28, 1989 raised an issue regarding the manner pursuant to
     which Petrie computed the basis of its Toys Common Stock transferred
     in connection with the exchange of certain of its exchangeable
     subordinated debentures.  The examining agent has proposed an adjust-
     ment to Petrie's taxable income which would result in an additional
     federal tax liability, including interest, of approximately $53
     million.  The Liquidating Trust, as successor to Petrie, is contest-
     ing the agent's proposed adjustment in administrative proceedings. 
     If the Liquidating Trust and the IRS are unable to resolve this
     matter in administrative proceedings, the Liquidating Trust intends
     to litigate its position.  The Liquidating Trust believes that the
     agent's proposed adjustment is incorrect as a matter of law.  Depend-
     ing on how and when this issue is resolved with the IRS, there also
     may be due state and local taxes (and interest thereon).

          The Liquidating Trust believes that adequate accruals have been
     established in the accompanying financial statements to provide for
     any losses that may be incurred with respect to the aforementioned
     contingencies.

          Set forth below are the principal suits to which Petrie and the
     Liquidating Trust, as successor to Petrie, are defendants.

          As previously disclosed, actions were commenced in the New York
     State Supreme Court against Petrie, its directors and certain former
     members of its senior management alleging that, among other things,
     Petrie's directors violated their fiduciary duties of loyalty and
     fair dealing in connection with the sale of Petrie's retail opera-
     tions, Petrie's directors failed to adequately explore third-party
     interest and thus did not maximize shareholder value and PS Stores
     was in possession of non-public information that allowed it to
     purchase the retail operations at an inadequate price.  On March 29,
     1996, the New York State Supreme Court dismissed the consolidated
     action with prejudice.  On May 10, 1996, the plaintiffs filed a
     notice of appeal with the Appellate Division, First Department, of
     New York State Supreme Court with respect to the dismissal.

          As previously disclosed, a complaint was filed in New Mexico
     District Court against Petrie by a landlord for a retail store which
     had been operated by an affiliate of Petrie Retail prior to Petrie
     Retail's rejection of the underlying lease in Bankruptcy Court.  The
     complaint alleged that, in light of Petrie Retail's failure to
     perform its obligations under the lease, Petrie has liability as a
     guarantor for the amount due under the lease.  Petrie answered the
     complaint, denying liability.  The parties agreed to a settlement,
     effective as of November 4, 1996, and the complaint was dismissed.

          As previously disclosed, a complaint was filed in New York State
     Supreme Court against Petrie, the Liquidating Trust and the Liquidat-
     ing Trustees by five landlords and certain of their affiliates
     seeking declaratory relief and unspecified damages for breach of
     contract and fraud with respect to 146 store leases (which number was
     subsequently reduced to 135 store leases in an amended complaint). 
     The complaint alleges that the Liquidating Trust, as successor to
     Petrie, has liability as a guarantor of certain of these leases,
     notwithstanding Petrie's receipt from these landlords of releases
     with respect to substantially all of the purported lease guarantees. 
     On March 11, 1996, the defendants filed a motion to dismiss the
     complaint.  On September 18, 1996, plaintiffs represented to the
     court that they intended to file an amended complaint, and, as a
     result, defendants withdrew their motion to dismiss. Defendants are
     required to answer or otherwise move with respect to the proposed
     amended complaint by December 2, 1996.  While no assurance can be
     given, the defendants intend to defend themselves vigorously and
     believe that they have meritorious defenses to this action.

          In June 1988, a complaint was filed in California Superior Court
     against Petrie, as successor-in-interest on a lease, and other
     defendants by a landlord for cleanup costs associated with a gasoline
     leakage from storage tanks at the site of a former gas station.  On
     June 16, 1992, the trial court found Petrie liable for $470,000 in
     compensatory damages and $163,284 in costs and attorneys' fees, plus
     interest on such amounts from October 1, 1992 (which, as of November
     15, 1996, will be approximately $261,121).  On September 19, 1996,
     the trial court's decision was affirmed by the California Court of
     Appeals.  The Liquidating Trust intends to seek reimbursement from
     certain of the other defendants for all or a portion of the foregoing
     amounts, but there can be no assurance that the Liquidating Trust
     will be able to obtain reimbursement of any of such amounts.

          On or about October 30, 1996, a complaint was filed in New York
     Supreme Court by an insurance company and its affiliates against
     Petrie and the Liquidating Trust, as successor to Petrie, seeking
     payment of retrospective premium adjustments relating to insurance
     coverage from 1988 through 1995.  The plaintiffs seek damages in the
     amount of $1,728,183 with interest from October 31, 1996, plus
     damages in respect of anticipatory breach of obligations to pay
     future premium adjustments and attorneys' fees and costs.  The
     Liquidating Trust is required to answer the complaint by November 20,
     1996.

           In addition to the foregoing, the Liquidating Trust is involved
     in other legal proceedings relating to its liquidation and defaults
     by Petrie Retail in respect of Assumed Obligations.  The Liquidating
     Trust believes, based on available information, that, except as
     described above, it is unlikely that these items, individually or in
     the aggregate, will have a material adverse effect on the Liquidating
     Trust's liquidity or financial position.


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

          The following discussion should be read in conjunction with the
     Financial Statements and the Notes thereto provided herein.

          As previously disclosed, Petrie sold its retail operations to PS
     Stores on December 9, 1994, and on January 24, 1995 (the date on
     which Petrie's shareholders approved the Plan of Liquidation), Petrie
     commenced its liquidation.  As a result, effective January 28, 1995,
     Petrie changed its basis of accounting from a going-concern basis to
     a liquidation basis.  Following the receipt of all necessary con-
     sents, approvals and clearances, Petrie will dissolve.  For financial
     statement purposes, the Liquidating Trust is deemed to be the succes-
     sor to Petrie, and the results of operations of Petrie for the
     relevant periods are presented in the financial statements of the
     Liquidating Trust.  Beginning with the period ending December 31,
     1996, the Liquidating Trust has adopted the calendar year as its
     fiscal year.

     RESULTS OF OPERATIONS

          The Liquidating Trust's net income for the three months ended
     September 30, 1996 and the period from January 23, 1996 to September
     30, 1996 was $ 4,066,000 and $26,542,000, respectively, as compared
     to net loss of $73,471,000 and $174,986,000 incurred by Petrie for
     the three months and nine months ended October 28, 1995.

          As of November 11, 1996, the closing price per share of Toys
     Common Stock as reported on the New York Stock Exchange Composite
     Tape was $36-3/8 per share.  In applying a liquidation basis of
     accounting, the Liquidating Trust has given effect in its results of
     operations to fluctuations in the market price of its Toys Common
     Stock, and has recorded an unrealized gain on the Toys Common Stock
     of $3,160,000 for the three months ended September 30, 1996 and
     $40,445,000 for the period from January 23, 1996 to September 30,
     1996, respectively, compared with a net realized and unrealized loss
     of $78,051,000 for the three months ended October 28, 1995 and
     $241,167,000 for the nine months ended October 28, 1995.  As a result
     of the net realized and unrealized loss for the three and nine months
     ended October 28, 1995, Petrie recorded an income tax credit of
     $21,970,000 and $85,936,000, respectively.

          For the three months ended September 30, 1996 and the period
     from January 23, 1996 to September 30, 1996, the Liquidating Trust
     incurred corporate overhead of $854,000 and $18,645,000, respective-
     ly, compared with $17,681,000 and $20,433,000 for the three months
     and nine months ended October 28, 1995.  Corporate overhead generally
     consists of costs and expenses related to the liquidation and disso-
     lution of Petrie including, but not limited to, costs and expenses
     that the Liquidating Trust may have incurred as a result of Petrie
     Retail's bankruptcy, legal fees, insurance, accounting fees, sala-
     ries, real estate advisory fees, transfer agent fees, and printing
     and shareholder communications expenses.  The decrease in corporate
     overhead for the three months ended September 30, 1996 as compared to
     the three months ended October 28, 1995 resulted primarily from the
     accrual in 1995 of $15 million related to Petrie's liability as
     guarantor of certain leases to which Petrie Retail or one of its
     subsidiaries is a party and $2 million related to certain other
     liabilities Petrie may have incurred as a result of Petrie Retail's
     bankruptcy filing.  The Liquidating Trust intends to file a claim
     against Petrie Retail in the Bankruptcy Court in respect of any
     payments which are made by the Liquidating Trust for obligations that
     Petrie Retail or an affiliate thereof fails to perform as a result of
     Petrie Retail's bankruptcy filing.  Additionally, the Liquidating
     Trust will assert a right of setoff in respect of any such payments
     against any claims Petrie Retail and its affiliates may have against
     Petrie or the Liquidating Trust, as successor to Petrie.  The Liqui-
     dating Trust is unable to predict the timing or probability of the
     collection of these claims against Petrie Retail.  See "-- Liquidity
     and Capital Resources."  

          During the three months ended September 30, 1996 and the period
     from January 23, 1996 to September 30, 1996, the Liquidating Trust
     earned $1,760,000 and $4,742,000, respectively, in investment income,
     compared with $291,000 and $658,000 earned during the three months
     and nine months ended October 28, 1995.  The increase in investment
     income earned during the period ended September 30, 1996, as compared
     to the nine months ended October 28, 1995, is the result of the
     Liquidating Trust's sale of shares of Toys Common Stock and the
     investment of the proceeds therefrom in short-term investments.

     LIQUIDITY AND CAPITAL RESOURCES

          As previously disclosed, Petrie has placed 3,493,450 shares of
     Toys Common Stock into an escrow account and $67.5 million in cash
     equivalents (the interest on which has subsequently been withdrawn
     and reinvested outside of the collateral account by the Liquidating
     Trust, as permitted by the applicable agreement) into a collateral
     account.  These assets were placed into these accounts to secure
     Petrie's obligations relating to certain contingent liabilities
     pursuant to the terms of the Toys Acquisition Agreement, the Retail
     Operations Stock Purchase Agreement and other agreements with Toys
     "R" Us and/or PS Stores.  See "-- Contingent Liabilities."

          The assets of the Liquidating Trust are subject to the terms of
     a letter agreement dated as of January 24, 1995, pursuant to which
     Petrie agreed with Toys "R" Us that, until such time as a hedge or
     similar arrangement which protects the value of the Toys Common Stock
     is in place, Petrie would retain, either individually or in combina-
     tion, (i) cash in an amount of at least $177.5 million (the "Reserved
     Amount") or (ii) shares of Toys Common Stock having a market value
     (as of January 20, 1995) of at least twice the Reserved Amount, to
     secure the payment of Petrie's contingent liabilities.  Pursuant to
     the terms of this letter agreement, the Liquidating Trust, as succes-
     sor to Petrie, is presently required to retain substantially all of
     its assets.

          As of November 11, 1996, the Liquidating Trust's 5,055,576
     shares of Toys Common Stock had a market value of approximately
     $183.9 million, based upon a closing price per share of $36-3/8, as
     reported on the New York Stock Exchange Composite Tape.  During the
     fifty-two weeks prior to the date of this report, the price per share
     of Toys Common Stock has fluctuated from a high of $37-5/8 to a low
     of $20-1/2.  No assurance can be given as to the future market prices
     of Toys Common Stock.

          As of November 11, 1996, the Liquidating Trust had approximately
     $126 million in cash and cash equivalents.  The Liquidating Trust
     believes that it has sufficient liquid funds available to satisfy the
     liabilities of the Liquidating Trust that are likely to occur (in-
     cluding, without limitation, costs and expenses related to the
     administration of the Liquidating Trust such as legal fees, insur-
     ance, accounting fees, salaries, real estate advisory fees, transfer
     agent fees and printing and shareholder communication expenses).  To
     the extent that the Liquidating Trust's liquid funds are insufficient
     to satisfy such liabilities, however, the Liquidating Trust will
     liquidate some or all of the remaining shares of Toys Common Stock
     that it holds.  The Liquidating Trustees have determined not to
     approve any further distributions of shares of Toys Common Stock
     until the status of the Liquidating Trust's contingent liabilities is
     clarified.

          As more fully described in Item 1 of Part I, the Liquidating
     Trust's contingent liabilities primarily include liabilities relating
     to (i) guarantees of certain retail store leases, expiring at various
     times through 2011, to which Petrie Retail or an affiliate thereof is
     a party, and certain other liabilities that were assumed by Petrie
     Retail (but as to which Petrie's liability has not been released) in
     connection with the Sale to the extent that Petrie Retail fails to
     perform; (ii) Petrie's agreement with Petrie Retail to indemnify it
     for certain liabilities relating to Petrie Retail's withdrawal from
     the Multiemployer Plan; and (iii) an ongoing dispute with the IRS
     relating to the manner in which Petrie computed the basis of shares
     of Toys Common Stock transferred in connection with the exchange of
     certain of Petrie's exchangeable subordinated debentures in Petrie's
     1989 fiscal year.  See "Notes to Unaudited Financial Statements."

     CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF
     THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

          Except for historical matters, the matters discussed in this
     Form 10-Q are forward-looking statements that involve risks and
     uncertainties.  Forward-looking statements include, but are not
     limited to, statements relating to the status of the Liquidating
     Trust's contingent liabilities contained above in "Management's
     Discussion and Analysis of Financial Condition and Results of Opera-
     tions" and "Notes to Unaudited Financial Statements."

          The Liquidating Trust wishes to caution readers that in addition
     to factors that may be described elsewhere in this Form 10-Q, the
     following important factors, among others, could cause the Liquidat-
     ing Trust's assets and liabilities to differ materially from those
     expressed in any forward-looking statements made by, or on behalf of,
     the Liquidating Trust, and could materially affect the Liquidating
     Trust's financial condition and liquidity:

          (1)  A decision by Petrie Retail to close additional stores for
     which the Liquidating Trust, as successor to Petrie, has liability as
     a guarantor;

          (2)  A decision by Petrie Retail to liquidate while in Chapter
     11 or the conversion of Petrie Retail's bankruptcy case from Chapter
     11 to a case under Chapter 7;

          (3)  Other actions by Petrie Retail which cause the default of
     obligations assumed by Petrie Retail in connection with the Sale for
     which the Liquidating Trust, as successor to Petrie, may be deemed to
     have liability as the primary obligor;

          (4)  A decision by a court that the Liquidating Trust, as
     successor to Petrie, has liability as a guarantor of certain leases
     notwithstanding Petrie's receipt from the landlords thereunder of
     releases of guarantees with respect to such leases;

          (5)  An unfavorable resolution of the Liquidating Trust's
     dispute with the IRS with respect to the manner in which Petrie
     computed the basis of its Toys Common Stock transferred in its fiscal
     year ended January 28, 1989 in connection with the exchange of
     certain of its exchangeable subordinated debentures; 

          (6)  A material decline in the price per share of Toys Common
     Stock;

          (7)  An adverse material change in general economic conditions
     and the interest rate environment;

          (8)  The effects of, and changes in, laws and regulations and
     other activities of federal and local governments, agencies and
     similar organizations; and 

          (9)  The costs and other effects of other legal and administra-
     tive cases and proceedings, settlements and claims relating to the
     Liquidating Trust's contingent liabilities.  


                          PART II - OTHER INFORMATION

     ITEM 1.        LEGAL PROCEEDINGS.

                         The description of legal proceedings involving
                    the Liquidating Trust provided in Item 1 of Part I is
                    herein incorporated by reference as though fully set
                    forth herein.

     ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K.

               (a)       LIST OF EXHIBITS

                    Exhibit 27 -- Financial Data Schedule

               (b)  REPORTS ON FORM 8-K

                    None.


                                  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.

                                   PETRIE STORES LIQUIDATING TRUST

     Dated: November 13, 1996           By /s/ STEPHANIE R. JOSEPH  
                                           _______________________
                                        Stephanie R. Joseph
                                        Manager and Chief Executive Officer

     Dated: November 13, 1996           By /s/ H. BARTLETT BROWN   
                                           _________________________
                                           H. Bartlett Brown
                                           Assistant Manager, Chief Financial
                                           Officer and Principal Accounting 
                                           Officer