<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                         ------------------------------
                                    FORM 10-Q

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

         For the quarterly period ended August 3, 1997

                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                          Commission File Number 0-6672

                     MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


             Delaware                                95-2745285
  (State or other jurisdiction of          (I.R.S. employer identification
   incorporation or organization)                      number)


Mailing and
Street Address:  2430 East Del Amo Boulevard, Dominguez, California  90220-6306
-------------------------------------------------------------------------------
                    (Address of principal executive offices)

Registrant's telephone number, including area code: (310) 537-9220
-------------------------------------------------------------------------------


-------------------------------------------------------------------------------
                   Former name, 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.

                                 [X] Yes   [ ] No

Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.

Common Shares Outstanding at August 31, 1997                   24,455,771
-------------------------------------------------------------------------------


<PAGE>   2

            MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                     (Amounts in thousands except par value)
<TABLE>
<CAPTION>
                                                      August 3,      February 2,
                                                      (Unaudited)     (Audited)
                                                         1997           1997
                                                      ---------      ---------
<S>                                                   <C>            <C>      
Assets

Current Assets:
     Cash and cash equivalents                        $  10,170      $   9,639
     Merchandise inventories                            209,966        182,275
     Deferred income tax asset                            8,800          8,800
     Other current assets                                10,536          9,284
                                                      ---------      ---------

          Total current assets                          239,472        209,998

Property, Equipment and Improvements:
     Land                                                35,224         35,224
     Buildings and improvements                          86,413         85,397
     Automobiles and trucks                               3,003          3,003
     Furniture, fixtures and equipment                  100,165         96,119
     Leasehold improvements                              87,687         85,533
     Construction in progress                               185            912
                                                      ---------      ---------

                                                        312,677        306,188
     Less: Accumulated depreciation
               and amortization                        (141,431)      (132,693)
                                                      ---------      ---------
                                                        171,246        173,495
                                                      ---------      ---------

Other Assets                                              2,638          1,503

                                                      ---------      ---------
Total Assets                                          $ 413,356      $ 384,996
                                                      =========      =========
</TABLE>

<TABLE>
<CAPTION>

                                                      August 3,     February 2,
                                                     (Unaudited)     (Audited)
                                                         1997          1997
                                                      ---------      ---------
<S>                                                   <C>            <C>      
Liabilities and Stockholders' Equity

Current Liabilities:
     Checks outstanding                               $  12,482      $  21,369
     Current portion of long-term debt                    3,122          3,172
     Accounts payable                                    22,780         18,929
     Accrued expenses                                    54,450         56,306
     Income taxes payable                                     -         13,408
     Sales tax payable                                    5,283          3,793
                                                      ---------      ---------
          Total current liabilities                      98,117        116,977
                                                      ---------      ---------

Long-Term Debt                                           51,413          3,757
Deferred Income Taxes                                    12,233         12,233

Stockholders' Equity:
     Preferred stock, $1 par value;
        authorized, 500 shares; issued, none
     Common stock, $.02778 par value;
        authorized, 100,000 shares;
        issued 25,067 shares (August 3, 1997)
        and 26,262 shares (February 2, 1997)                696            729
     Additional paid-in capital                              26          9,606
     Retained earnings                                  266,692        273,898
                                                      ---------      ---------

                                                        267,414        284,233
     Less:  Treasury stock, at cost, 549 shares
      (August 3, 1997) and 1,589 shares (February
      2, 1997)                                          (15,821)       (32,204)

                                                      ---------      ---------
Total Stockholders' Equity                              251,593        252,029
                                                      ---------      ---------

Total Liabilities and Stockholders' Equity            $ 413,356      $ 384,996
                                                      =========      =========
</TABLE>
------------
See Notes to Consolidated Financial Statements.

<PAGE>   3
            MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                   (UNAUDITED)
                 (Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
                               For the three months ended    For the six months ended
                               --------------------------    -------------------------

                                 August 3,  July 28,           August 3,   July 28,
                                  1997        1996               1997        1996
                                --------    --------           --------    --------
<S>                             <C>         <C>                <C>         <C>     
NET SALES                       $176,980    $157,952           $360,444    $317,084
COST OF SALES                    102,719      92,525            207,629     181,251
                                --------    --------           --------    --------

GROSS PROFIT                      74,261      65,427            152,815     135,833
                                --------    --------           --------    --------

Store expenses                    52,620      46,567            103,483      94,258
Warehouse and administrative
  expenses                        12,837      12,417             30,669      27,746
                                --------    --------           --------    --------
TOTAL OPERATING EXPENSES          65,457      58,984            134,152     122,004

OPERATING INCOME                   8,804       6,443             18,663      13,829
INTEREST EXPENSE, NET                447       1,583                645       3,305
                                --------    --------           --------    --------

EARNINGS BEFORE INCOME TAXES       8,357       4,860             18,018      10,524
INCOME TAX EXPENSE                 3,356       1,847              7,027       3,999
                                --------    --------           --------    --------

NET EARNINGS                    $  5,001    $  3,013           $ 10,991    $  6,525
                                ========    ========           ========    ========


EARNINGS PER COMMON SHARE       $   0.20    $   0.12           $   0.43    $   0.25
                                ========    ========           ========    ========
AVERAGE SHARES OUTSTANDING        25,415      25,721             25,415      25,707
                                ========    ========           ========    ========

</TABLE>
------------
See Notes to Consolidated Financial Statements.
<PAGE>   4
            MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                   (UNAUDITED)
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                            Common Stock                                                Treasury Stock
                                       ----------------------     Additional               ----------------------------------------
                                                                    Paid-in    Retained
                                         Shares       Amount       Capital     Earnings     Shares        Amount        Total
                                       ---------    ---------    ---------    ---------    ---------    ---------    ---------
<S>               <C>                     <C>       <C>          <C>          <C>              <C>      <C>          <C>      
Balance, February 2, 1997                 26,262    $     729    $   9,606    $ 273,898        1,589    ($ 32,204)   $ 252,029

Exercise of stock options                    481           13        6,556                                               6,569

Non-cash compensation
  expense                                                              24                                                   24

Purchase of Treasury stock,  at cost                                                             636      (18,020)     (18,020)

Treasury stock retired                    (1,676)         (46)     (16,160)     (18,197)      (1,676)      34,403            0

Net income for six months                                                        10,991                                 10,991

                                       ---------    ---------    ---------    ---------    ---------    ---------    ---------

Balance,  August  3, 1997                 25,067    $     696    $      26    $ 266,692          549    ($ 15,821)   $ 251,593
                                       =========    =========    =========    =========    =========    =========    =========
</TABLE>
------------
See Notes to Consolidated Financial Statements.



<PAGE>   5
            MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                                     For the six months ended
                                                                    -------------------------
                                                                     August 3,     July 28,
                                                                       1997           1996
                                                                    ---------      ---------
<S>                                                                 <C>            <C>      
INCREASE IN CASH AND CASH EQUIVALENTS 
  Cash flows from operating activities:
  Cash received from customers                                      $ 360,444      $ 317,084
  Cash paid to suppliers and employees                               (366,577)      (305,924)
  Income taxes paid                                                   (22,781)        (5,460)
  Interest paid (net of amount capitalized)                              (528)        (3,518)
  Interest received                                                        19             85
                                                                    ---------      ---------
    Net cash (used in) provided by operating activities               (29,423)         2,267

Cash flows from investing activities:
  Capital expenditures                                                 (6,886)        (5,859)
  Fire related disposals (net)                                              -          2,473
  Proceeds from sale of fixed assets                                      685          1,525
                                                                    ---------      ---------
    Net cash used in investing activities                              (6,201)        (1,861)

Cash flows from financing activities:
  Borrowings under line of credit agreements and long-term debt       169,200        417,800
  Repayments under line of credit agreements and long-term debt      (121,750)      (413,634)
  Repurchase of treasury stock                                        (18,020)        (4,704)
  Proceeds from sale of stock options                                   6,569          3,145
  Other (net)                                                             156            570
                                                                    ---------      ---------
    Net cash provided by financing activities                          36,155          3,177
                                                                    ---------      ---------

    Increase  in cash and cash equivalents                                531          3,583
Cash and cash equivalents, beginning of period                          9,639          7,285
                                                                    =========      =========
Cash and cash equivalents, end of period                            $  10,170      $  10,868
                                                                    =========      =========
</TABLE>


See Notes to Consolidated Financial Statements.

<PAGE>   6
            MAC FRUGAL'S BARGAINS o CLOSE-OUTS-INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (Amounts in thousands)
                                   (continued)
<TABLE>
<CAPTION>
                                                                    For the six months ended
                                                                    ------------------------
                                                                     August 3,    July 28,
                                                                      1997          1996
                                                                    --------      --------
<S>                                                                 <C>           <C>     
Reconciliation of Net Income to Net Cash (Used In)
  Provided By Operating Activities:
Net income                                                          $ 10,991      $  6,525
                                                                    --------      --------
Adjustments to reconcile net income to net cash 
  (used in) provided by operating activities:
  Depreciation and amortization                                        8,900         9,320
  Gain on sale of fixed assets                                          (450)         (802)
  Non-cash compensation expense                                           24            43
  Changes in assets and liabilities:
    Increase in inventory                                            (27,691)      (14,379)
    Increase in insurance receivable                                       -        (5,499)
Decrease (increase) in other assets                                      (41)        1,059
   (Decrease) increase in checks outstanding, accounts payable,
       accrued expenses and sales tax payable                         (5,402)        7,461
    Decrease in federal and state income taxes                       (15,754)       (1,461)

                                                                    --------      --------
  Total adjustments                                                  (40,414)       (4,258)
                                                                    --------      --------

  Net cash (used in) provided by operating activities               ($29,423)     $  2,267
                                                                    ========      ========
</TABLE>


See Notes to Consolidated Financial Statements.
<PAGE>   7
            MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC. AND SUBSIDIARIES
                     PART I - ITEM I - FINANCIAL STATEMENTS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (Dollar amounts in thousands)

Note 1    The condensed consolidated financial statements have been prepared in
          accordance with generally accepted accounting principles, by
          Mac Frugal's Bargains - Close-outs Inc., without audit. Pursuant to 
          the rules and regulations of the Securities and Exchange Commission,
          certain information and footnote disclosures normally included in
          consolidated financial statements prepared in accordance with
          generally accepted accounting principles have been omitted or
          condensed. It is management's belief that the disclosures made are
          adequate to make the information presented not misleading and reflect
          all adjustments (consisting only of normal recurring adjustments)
          necessary for a fair presentation of financial position and results of
          operations for the periods presented. The results of operations of the
          periods presented should not be considered as necessarily indicative
          of operations for the full year. It is recommended that these
          condensed consolidated financial statements be read in conjunction
          with the consolidated financial statements for the year ended February
          2, 1997 and the notes thereto included in the Company's 10-K.

Note 2    Earnings per Common Share is based on the weighted average number of
          Common Shares outstanding, adjusted for dilutive effects of stock
          options, if applicable.

Note 3    The Company's effective tax rate for fiscal 1996 and the first half of
          fiscal 1997 was 38.0% and 39.0%, respectively. For interim reporting
          purposes the entire provision for income tax expense was classified as
          current.

          Deferred income taxes reflect the net tax effects of temporary
          differences between the carrying amount of assets and liabilities for
          financial reporting purposes and the amounts used for income tax
          purposes. The Company had a net deferred tax liability of $3,433 at
          August 3, 1997 and February 2, 1997.

          The Company provided no valuation allowance against its deferred tax
          assets recorded as of August 3, 1997 and February 2, 1997 because
          management believes it is more likely than not that the deferred
          income tax assets will be realized.

Note 4    At August 3, 1997, the Company classified that portion of its
          revolving debt as long-term that is not required to be repaid at its
          next annual clean-down date of February 28, 1998.


Note 5    In February 1997, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standards No. 128, Earnings Per
          Share (SFAS 128). This statement is effective for financial statements
          issued for periods ending after December 15, 1997, including interim
          periods. The statement establishes standards for computing and
          presenting earnings per share and will require additional earnings per
          share disclosures within the financial statements issued after the
          effective date. The adoption of SFAS 128 will be reflected in the
          Company's 1997 consolidated financial statements. The adoption of SFAS
          128 will not impact the Company's results of operations or financial
          position.

<PAGE>   8

Note 6    In June 1997, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standards No. 131, Disclosures about
          segments of an Enterprise and Related Information (SFAS 131), which
          will be effective for the Company beginning February 2, 1998. SFAS 131
          redefines how operating segments are determined and requires
          disclosure of certain financial and descriptive information about a
          company's operating segments. The Company does not believe adoption of
          this statement will have a material impact on current disclosures.

<PAGE>   9
           PART I - ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITIONS AND INTERIM RESULTS OF OPERATIONS

                          (DOLLAR AMOUNTS IN THOUSANDS)

THIS QUARTERLY REPORT MAY CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES
AFFECTING THE COMPANY'S OPERATIONS AND FINANCIAL PERFORMANCE. ALTHOUGH THE
COMPANY BELIEVES THAT SUCH STATEMENTS REFLECT REASONABLE EXPECTATIONS OF FUTURE
EVENTS, NO ASSURANCES CAN BE GIVEN THAT SUCH STATEMENTS WILL PROVE TO HAVE BEEN
CORRECT. ACTUAL RESULTS MAY DIFFER MATERIALLY DUE TO GENERAL ECONOMIC
CONDITIONS; CHANGES IN CONSUMER DEMAND AND PREFERENCES; ADVERSE WEATHER
PATTERNS; COMPETITIVE FACTORS INCLUDING PRICING AND PROMOTIONAL ACTIVITIES OF
MAJOR COMPETITORS; THE AVAILABILITY OF MERCHANDISE ON FAVORABLE TERMS; IMPORT
RISKS INCLUDING POTENTIAL POLITICAL OR SOCIAL UNREST, DUTIES, TARIFFS AND
QUOTAS; AND OTHER FACTORS DESCRIBED IN THE COMPANY'S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION.

RESULTS OF OPERATIONS

THIRTEEN WEEK PERIOD ENDED AUGUST 3, 1997 ("SECOND QUARTER 1997") COMPARED WITH
THIRTEEN WEEK PERIOD ENDED JULY 28, 1996 ("SECOND QUARTER 1996").

Net sales increased 12.0% for the Second Quarter 1997 compared to the Second
Quarter 1996. The sales increase was the combined result of opening 6 net new
stores since July 28, 1996, and the positive impact of a 10.3% increase in
comparable store sales. At August 3, 1997, 321 stores were in operation compared
to 315 stores at July 28, 1996. The Company believes that the comparable sales
increase was primarily attributable to the Company's strategic objective to
increase sales and customer count by offering more branded products at more
competitive prices. The comparable store sales increase for the Second Quarter
1997 was driven primarily by increases in consumables, softlines and seasonal
merchandise, offset in part by a decrease in electronics.

Sales from the 168 California stores open at August 3, 1997, were approximately
58% of the Company's total sales for the Second Quarter 1997 as compared to 59%
for the Second Quarter 1996. California stores experienced a comparable store
sales increase for the Second Quarter 1997, similar to that of the Company-wide
experience.

The gross profit margin of 42.0% for the Second Quarter 1997, increased from
41.4% for the Second Quarter 1996. The increase in the gross profit margin was
primarily attributed to a higher initial markup on shipments to the stores in
the Second Quarter 1997 versus the Second Quarter 1996. This higher markup on
shipments was primarily attributed to a change in merchandise mix towards more
branded consumable products in the Second Quarter 1997 versus a concentration in
lower margin electronics during the Second Quarter 1996.

Operating expenses were 37.0% of sales for the Second Quarter of 1997 compared
to 37.3% for the Second Quarter 1996. The Company's sales increases in the
Second Quarter 1997 translated into lower total operating expenses as a percent
of sales.


<PAGE>   10

Store expenses were 29.7% and 29.5% of sales for the Second Quarter 1997 and the
Second Quarter 1996, respectively. General cost containment, leveraging of
expenses, and increased sales in the Second Quarter 1997, offset in part by the
minimum wage increase in California effective March 1997, resulted in fairly
consistent expenses as a percent of sales.

Warehouse and administrative expenses were 7.3% and 7.9% of sales for the Second
Quarter 1997 and the Second Quarter 1996, respectively. Operating efficiencies
in the warehouse in addition to leveraging a relatively fixed administrative
expense structure with increased sales resulted in a decrease in expenses as a
percent of sales. The Company continues to operate from one distribution center
as a result of the loss of the New Orleans distribution facility which was
destroyed by fire on March 21, 1996. Since then, all of the Company's stores
have been serviced by the Company's warehouse and distribution facility in
Rancho Cucamonga, California. The Company believes it can operate its warehouse
operations more efficiently in the immediate future through its West Coast
distribution facility. Through continued control over buying and inventory
receipt management, the Company believes it has adequate capacity to service the
Company's distribution needs in the immediate future.

The $1,136 decrease in interest expense for the Second Quarter 1997 compared to
the Second Quarter 1996 resulted from both a decrease in the average amount of
debt outstanding and lower interest rates. The decrease in the average amount of
debt outstanding is the combined result of a decrease in average inventories
encompassing the last four quarters ended August 3, 1997 compared to the same
time period in the prior year, earnings generated from operations during the
last twelve months and proceeds from the insurance settlement on the New Orleans
distribution center received in the second and fourth quarters of fiscal 1996,
partially offset by the repurchase of $43,947 in stock during the last four
quarters ended August 3, 1997.

The income tax rate for the Second Quarter 1997 was 40.2%, and for interim
purposes, the entire provision for income taxes is classified as current. Income
taxes were adjusted in the Second Quarter 1997 to reflect a 39.0% rate for the
first half of fiscal 1997. The income tax rate of 39.0% versus 38.0% for the 
prior year reflects certain projected changes in permanent items relative to 
pre-tax earnings.

The Company had a net deferred tax liability of $3,433 at August 3, 1997 and
February 2, 1997.

TWENTY-SIX WEEK PERIOD ENDED AUGUST 3, 1997 ("YEAR-TO-DATE 1997") COMPARED WITH
TWENTY-SIX WEEK PERIOD ENDED JULY 28, 1996 ("YEAR-TO-DATE 1996").

Net sales increased 13.7% for the Year-to-Date 1997 compared to the Year-to-Date
1996. The total sales increase was a result of opening 6 net new stores since
July 28, 1996 and the positive impact of a 11.9% increase in comparable store
sales. The Company believes that the comparable sales increase was primarily
attributable to the Company's strategic objective to increase sales and customer
count by offering more branded products at more competitive prices. The sales
increase for the Year-to-Date 1997 was driven primarily by increases in
consumables, softlines and seasonal merchandise, offset in part by a decrease in
electronics.

Sales from the 168 California stores open at August 3, 1997, were approximately
58% of the Company's total sales for the Year-to-Date 1997 as compared to 59%
for the Year-to-Date 1996. California stores experienced a comparable store
sales increase for the Year-to-Date 1997, similar to that of the Company-wide
trend.

<PAGE>   11

The gross profit margin of 42.4% for the Year-to-Date 1997, decreased from 42.8%
for the Year-to-Date 1996. The decrease in the gross profit margin for the
Year-to-Date 1997 versus the Year-to-Date 1996 was primarily attributed to an
increase in markdowns to clear old aged inventory which is consistent with the
Company's strategy to increase inventory turnover, offset in part by a higher
initial markup on shipments to the stores during the Year-to-Date 1997 versus
the Year-to-Date 1996. This higher initial markup on shipments was primarily
attributed to a change in merchandise mix towards more branded consumable
products during the Year-to-Date 1997 versus a concentration in lower margin
electronics during the Year-to-Date 1996.

Operating expenses were 37.2% of sales for the Year-to-Date 1997 compared to
38.5% for the Year-to-Date 1996. The Company's sales increases during the
Year-to-Date 1997 in conjunction with leveraging of expenses translated into
lower total operating expenses as a percent of sales.

Store expenses were 28.7% and 29.7% of sales for the Year-to-Date 1997 and the
Year-to-Date 1996, respectively. General cost containment, leveraging of
expenses, and increased sales for the Year-to-Date 1997, offset in part by the
minimum wage increase in California effective March 1997, resulted in a
reduction in expenses as a percent of sales in most expense categories.

Warehouse and administrative expenses were 8.5% and 8.8% of sales for the
Year-to-Date 1997 and the Year-to-Date 1996, respectively. Operating
efficiencies in the warehouse in addition to leveraging a relatively fixed
administrative expense structure resulted in a decrease in expenses as a percent
of sales. The Company continues to operate from one distribution center as a
result of the loss of the New Orleans distribution facility which was destroyed
by fire on March 21, 1996. Since then, all of the Company's stores have been
serviced by the Company's warehouse and distribution facility in Rancho
Cucamonga, California. The Company believes it can operate its warehouse
operations more efficiently in the immediate future through its West Coast
distribution facility. Through continued control over buying and inventory
receipt management, the Company believes it has adequate capacity to service the
Company's distribution needs in the immediate future.

The $2,660 decrease in interest expense for the Year-to-Date 1997 compared to
the Year-to-Date 1996 resulted from both a decrease in the average amount of
debt outstanding and lower interest rates. The decrease in the average amount of
debt outstanding is the combined result of a decrease in average inventories
encompassing the last four quarters ended August 3, 1997 compared to the same
time period in the prior year, earnings generated from operations during the
last twelve months and proceeds from the insurance settlement on the New Orleans
distribution center received in the second and fourth quarters of fiscal 1996,
partially offset by the repurchase of $43,947 in stock during the last four
quarters ended August 3, 1997.

The income tax rate for the Year-to-Date 1997 was 39.0% and for interim
purposes, the entire provision for income taxes is classified as current. The
income tax rate of 39.0% versus 38.0% for the prior year reflects certain 
projected changes in permanent items relative to pre-tax earnings.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents increased $531 for the Year-to-Date 1997 compared to
an increase of $3,583 for the Year-to-Date 1996. The decrease of cash and cash
equivalents for the Year-to-Date 1997 compared to the Year-to-Date 1996 related
primarily to the impact on inventory in the prior year related to the fire at
the New Orleans distribution center on March 21, 1996, coupled with an
associated increase in accounts payable for the Year-to-Date 1996. In contrast,
the Year-to-Date 1997 reflects 

<PAGE>   12

income tax payments related to the increase in earnings for the Year-to-Date
1997 and the repurchase of treasury stock and associated debt, partially offset
by the proceeds from the sale of stock options.

As of August 3, 1997, the Company's long-term debt was 20.4% of equity and total
debt was 21.7% of equity. At July 28, 1996, long-term debt and total debt were
both 43.0% of equity. At February 2, 1997, long-term debt was 1.5% of equity and
total debt was 2.7% of equity. The improvement in both leverage ratios at August
3, 1997 compared to July 28, 1996 reflects the decrease in average inventories
encompassing the last four quarters ended August 3, 1997 and the borrowings
necessary to finance them. The improvement also reflects the cash infusion of
the insurance proceeds from the New Orleans distribution center settlement
received in the second and fourth quarters of fiscal 1996 and the Company's
earnings over the last four quarters, offset in part by the repurchase of stock
during the last four quarters ended August 3, 1997. The increase in the level of
long-term debt and total debt compared to February 2, 1997 reflects the building
of the Company's inventories to meet increased operational needs due to sales
demands and to meet seasonal needs.

The Company believes its present lines of credit are adequate to meet any
seasonal or temporary liquidity needs that cannot be met with cash flow from
operating activities. At August 3, 1997, the Company had $10,000 outstanding
revolving debt under the Company's $175,000 committed credit facility. There was
$37,500 outstanding under the Company's uncommitted credit lines at August 3,
1997.

The Company's current ratio as of August 3, 1997 was 2.44 versus 1.80 at fiscal
year end 1996 and 2.74 at July 28, 1996. The decrease in the Company's current
ratio at August 3, 1997 compared to July 28, 1996 is due primarily to an
insurance receivable recorded in current assets as of July 28, 1996 and accrued
liabilities recorded as of August 3, 1997, both related to the fire at the New
Orleans distribution center.

For the six months ended August 3, 1997, inventory turnover improved to 1.07
from .93 for the six months ended July 28, 1996. This improvement in inventory
turnover reflects the Company's improved sales performance and reduced inventory
levels for the first half of 1997 versus the first half of 1996.


<PAGE>   13
                           PART II - OTHER INFORMATION

Item 4    Submission of Matters to a Vote of Security Holders

         The Company held its 1997 Annual Meeting of Stockholders on June 18,
         1997 (the "Annual Meeting"). At the Annual Meeting, shareholders
         elected all six directors nominated. The following table sets forth the
         number of votes cast for and votes withheld from each nominee. There
         were no broker non-votes for any nominee.
<TABLE>
<CAPTION>

                  Nominee                  For                 Withheld
                  -------                  ---                 --------
<S>                                    <C>                     <C>      
         David H. Batchelder           21,994,525              1,060,243
         Philip L. Carter              21,994,177              1,060,591
         Peter C. Cooper               22,007,220              1,047,548
         I. T. Corley                  21,992,235              1,062,533
         Mark J. Miller                21,991,155              1,063,613
         James J. Zehentbauer          21,993,988              1,060,780
</TABLE>

Item 6   Exhibits and Reports on Form 8-K

                  (a)      Exhibit 27 --  Financial Data Schedule.

                  (b)      Reports on Form 8-K - No reports on Form 8-K have
                           been filed during the quarter ended August 3, 1997.



<PAGE>   14

                                   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.


                       MAC FRUGAL'S BARGAINS - CLOSE-OUTS INC.



                       /s/  Philip L. Carter
                       --------------------------------------------------------
                       Philip L. Carter
                       Director, President and Chief Executive Officer



                       /s/  Neil T. Watanabe
                       --------------------------------------------------------
                       Neil T. Watanabe
                       Senior Vice President and Chief Financial Officer






DATE:  September 10, 1997