<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 November 2, 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 o 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 November 30, 1997                   24,834,734
--------------------------------------------------------------------------------

<PAGE>   2
            MAC FRUGAL'S BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                     (Amounts in thousands except par value)


<TABLE>
<CAPTION>
                                                    November 2,   February 2,
                                                   (Unaudited)    (Audited)
                                                      1997           1997
                                                    ---------      ---------
<S>                                                 <C>            <C>      
Assets

Current Assets :
     Cash and cash equivalents                      $  12,582      $   9,639
     Merchandise inventories                          246,642        182,275
     Deferred income tax asset                          8,800          8,800
     Other current assets                               7,968          9,284
                                                    ---------      ---------

          Total current assets                        275,992        209,998


Property, Equipment and Improvements :
     Land                                              34,505         35,224
     Buildings and improvements                        86,333         85,397
     Automobiles and trucks                             3,003          3,003
     Furniture, fixtures and equipment                102,032         96,119
     Leasehold improvements                            89,245         85,533
     Construction in progress                             212            912
                                                    ---------      ---------

                                                      315,330        306,188
     Less: Accumulated depreciation
               and amortization                      (145,611)      (132,693)
                                                    ---------      ---------
                                                      169,719        173,495
                                                    ---------      ---------

Other Assets                                            2,640          1,503


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

Total Assets                                        $ 448,351      $ 384,996
                                                    =========      =========


Liabilities and Stockholders' Equity

Current Liabilities :
     Checks outstanding                             $  16,568      $  21,369
     Current portion of long-term debt                  3,072          3,172
     Accounts payable                                  32,553         18,929
     Accrued expenses                                  53,360         56,306
     Income taxes payable                               1,750         13,408
     Sales tax payable                                  7,727          3,793
                                                    ---------      ---------
          Total current liabilities                   115,030        116,977
                                                    ---------      ---------

Long-Term Debt                                         61,730          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 25,097 shares (November 2, 1997)
        and 26,262 shares (February 2, 1997)              697            729
     Additional paid-in capital                           582          9,606
     Retained earnings                                277,116        273,898
                                                    ---------      ---------
                                                      278,395        284,233
     Less:  Treasury stock, at cost, 662 shares
      (November  2, 1997) and 1,589 shares
      (February 2,1997)                               (19,037)       (32,204)

                                                    ---------      ---------
Total Stockholders' Equity                            259,358        252,029
                                                    ---------      ---------

Total Liabilities and Stockholders' Equity          $ 448,351      $ 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 nine months ended
                                                    --------------------------     -------------------------
                                                     November 2,   October 27,      November 2,  October 27,
                                                        1997          1996            1997         1996
                                                      --------     --------         --------     --------
<S>                                                   <C>          <C>              <C>          <C>     
NET SALES                                             $189,733     $174,488         $550,177     $491,572
COST OF SALES                                          107,583       99,528          315,212      280,779
                                                      --------     --------         --------     --------
                                                                                   
GROSS PROFIT                                            82,150       74,960          234,965      210,793
                                                      --------     --------         --------     --------
                                                                                   
Store expenses                                          51,095       52,315          154,578      146,573
Warehouse and administrative                                                       
  expenses                                              13,099       12,569           43,768       40,315
                                                      --------     --------         --------     --------
TOTAL  EXPENSES                                         64,194       64,884          198,346      186,888
                                                                                   
OPERATING INCOME                                        17,956       10,076           36,619       23,905
INTEREST EXPENSE, NET                                      867        1,836            1,512        5,141
                                                      --------     --------         --------     --------
                                                                                   
EARNINGS BEFORE INCOME TAXES                            17,089        8,240           35,107       18,764
INCOME TAX EXPENSE                                       6,665        3,131           13,692        7,130
                                                      --------     --------         --------     --------
                                                                                   
NET EARNINGS                                          $ 10,424     $  5,109         $ 21,415     $ 11,634
                                                      ========     ========         ========     ========
                                                                                   
                                                                                   
EARNINGS  PER COMMON SHARE                            $   0.42     $   0.20         $   0.85     $   0.45
                                                      ========     ========         ========     ========
AVERAGE SHARES OUTSTANDING                              25,062       26,069           25,298       25,856
                                                      ========     ========         ========     ========
</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>      
Balance, February 2, 1997                 26,262   $     729   $   9,606   $ 273,898       1,589    ($ 32,204)   $ 252,029

Exercise of stock options                    511          14       7,093                                             7,107

Non-cash compensation
  expense                                                             43                                                43

Purchase of Treasury stock, at cost                                                          749      (21,236)     (21,236)

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

Net income for nine months                                                    21,415                                21,415

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

Balance, November 2, 1997                 25,097   $     697   $     582   $ 277,116         662    ($ 19,037)   $ 259,358
                                       =========   =========   =========   =========   =========    =========    =========
</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 nine months ended
                                                                   --------------------------
                                                                   November 2,    October 27,
                                                                      1997           1996
                                                                    ---------      ---------
<S>                                                                 <C>            <C>      
INCREASE IN CASH AND CASH EQUIVALENTS 
Cash flows from operating activities:
  Cash received from customers                                      $ 550,177      $ 491,572
  Cash paid to suppliers and employees                               (555,297)      (477,081)
  Income taxes paid                                                   (25,350)        (5,894)
  Interest paid (net of amount capitalized)                            (1,362)        (5,860)
  Interest received                                                        20            212
                                                                    ---------      ---------
    Net cash (used in) provided by operating activities               (31,812)         2,949

Cash flows from investing activities:
  Capital expenditures                                                (11,288)        (8,574)
  Fire related disposals (net)                                             --          2,474
  Proceeds from sale of fixed assets                                    2,299          1,525
                                                                    ---------      ---------
    Net cash used in investing activities                              (8,989)        (4,575)

Cash flows from financing activities:
  Borrowings under line of credit agreements and long-term debt       342,400        659,900
  Repayments under line of credit agreements and long-term debt      (284,900)      (621,985)
  Repurchase of treasury stock                                        (21,236)        (8,283)
  Proceeds from sale of stock options                                   7,107          5,313
  Other (net)                                                             373            844
                                                                    ---------      ---------
    Net cash provided by financing activities                          43,744         35,789
                                                                    ---------      ---------

    Increase  in cash and cash equivalents                              2,943         34,163
Cash and cash equivalents, beginning of period                          9,639          7,285
                                                                    ---------      ---------
Cash and cash equivalents, end of period                            $  12,582      $  41,448
                                                                    =========      =========
</TABLE>


--------------
See Notes to Consolidated Financial Statements.

<PAGE>   6
            MAC FRUGAL'SR BARGAINS o CLOSE-OUTS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (Amounts in thousands)
                                   (continued)

<TABLE>
<CAPTION>
                                                             For the nine months ended
                                                            ---------------------------
                                                            November 2,     October 27,
                                                                1997          1996
                                                              --------      --------
<S>                                                           <C>           <C>     
Reconciliation of Net Income to Net Cash (Used In)
  Provided By Operating Activities:
Net income                                                    $ 21,415      $ 11,634
                                                              --------      --------
Adjustments to reconcile net income to net cash
  (used in) provided by operating
  activities:
  Depreciation and amortization                                 13,282        13,810
  Gain on sale of fixed assets                                    (517)         (802)
  Non-cash compensation expense                                     43            61
  Changes in assets and liabilities:
    Increase in inventory                                      (64,367)      (23,606)
    Increase in insurance receivable                                --        (8,160)
    Decrease in other assets                                       179         1,578
    Increase in checks outstanding, accounts payable,
       accrued expenses and sales tax payable                    9,811         7,198
    (Decrease) increase in federal and state income taxes      (11,658)        1,236

                                                              --------      --------
  Total adjustments                                            (53,227)       (8,685)
                                                              --------      --------

  Net cash (used in) provided by operating activities         ($31,812)     $  2,949
                                                              ========      ========
</TABLE>


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

See Notes to Consolidated Financial Statements.
<PAGE>   7
            MAC FRUGAL'S BARGAINS O 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 o Close-outs Inc. and subsidiaries (the "Company")
         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.

         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
         fiscal 1997 consolidated financial statements. The adoption of SFAS 128
         will not impact the Company's results of operations or financial
         position.

Note 3   The Company's effective tax rate for fiscal 1996 and the first three
         quarters 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
         November 2, 1997 and February 2, 1997.

         The Company provided no valuation allowance against its deferred tax
         assets recorded as of November 2, 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 November 2, 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.
<PAGE>   8
Note 5   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.

Note 6   On November 5, 1997 the Company announced that it had entered into a
         definitive agreement with Consolidated Stores Corporation,
         ("Consolidated") the nation's largest close-out retailer, to be
         acquired in a stock for stock merger.

         At the effective time of the merger, all issued and outstanding Company
         shares of common stock will be canceled and converted automatically
         into the right to receive a number of duly authorized shares of
         Consolidated's common stock.

         Under the terms of the merger agreement, Consolidated will issue
         between 0.88 and 1.00 shares of stock for each share. The final
         exchange ratio will be based upon the average closing price per share
         of Consolidated's stock during a twenty day period prior to the
         effective time of the merger. Based on Consolidated's twenty day
         average closing price through November 4, 1997, the exchange ratio
         would be .99. The transaction is expected to close in January 1998.

         Consolidated expects to take an estimated pre-tax charge to earnings of
         approximately $75 million to $100 million relating to the cost of
         integrating the two companies.

         The merger will be accounted for as a pooling of interests and will be
         tax free to the Company's shareholders. The transaction is subject to
         customary conditions, including approval by both companies'
         shareholders and regulatory agencies.

         The merger is described in greater detail in the Company's Current
         Report on Form 8-K dated November 7, 1997 filed with the Securities and
         Exchange Commission (the "SEC"). In connection with the transaction, a
         joint proxy statement and prospectus (the "Prospectus/Proxy Statement")
         has been filed with the SEC and is expected to be mailed to
         stockholders of both companies in December.


<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 (INCLUDING THE PRECEDING NOTES) 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 NOVEMBER 2, 1997 ("THIRD QUARTER 1997") COMPARED WITH
THIRTEEN WEEK PERIOD ENDED OCTOBER 27, 1996 ("THIRD QUARTER 1996").

Net sales increased 8.7% for the Third Quarter 1997 compared to the Third
Quarter 1996. The sales increase was the combined result of opening 8 net new
stores since October 27, 1996, and the positive impact of a 6.8% increase in
comparable store sales. At November 2, 1997, 325 stores were in operation
compared to 317 stores at October 27, 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 Third
Quarter 1997 was driven primarily by increases in consumables, toys and seasonal
merchandise, offset in part by a decrease in electronics and housewares. The
customer count for the Third Quarter 1997 increased 2.6% over the same period in
the prior year.

Sales from the 169 California stores open at November 2, 1997, were
approximately 59% of the Company's total sales for both the Third Quarter 1997
and the Third Quarter 1996. California stores experienced a comparable store
sales increase of 5.9% for the Third Quarter 1997.

The gross profit margin of 43.3% for the Third Quarter 1997, increased from
43.0% for the Third Quarter 1996. The increase in the gross profit margin was
primarily attributed to a decrease in markdowns, partially offset by a lower
markup on shipments which is attributed to a change in merchandise mix towards
more branded consumable products.

Operating expenses were 33.8% of sales for the Third Quarter 1997 compared to
operating expenses of 37.2% for the Third Quarter 1996. The Company's sales
increases in the Third Quarter 1997 translated into lower total operating
expenses as a percent of sales.
<PAGE>   10
Store expenses were 26.9% and 30.0% of sales for the Third Quarter 1997 and the
Third Quarter 1996, respectively. General cost containment, leveraging of
expenses, and increased sales in the Third Quarter 1997 continued to reduce
expenses as a percent of sales. Specific decreases were realized in: advertising
which included a one-time fall promotion in the Third Quarter 1996; workers'
compensation which included a benefit in the Third Quarter 1997 from favorable
actuarial results; and utility expense which continued to decline as a result of
savings achieved from energy efficiency programs. Store payroll remained
relatively constant as a percent of sales in spite of the state and federal
minimum wage increases in March 1997 and September 1997.

Warehouse and administrative expenses were 6.9% and 7.2% of sales for the Third
Quarter 1997 and the Third 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 in fiscal 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 $969 decrease in interest expense for the Third Quarter 1997 compared to the
Third 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 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 $43,584 in stock during the last
four quarters ended November 2, 1997.

The income tax rate for the Third Quarter 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.

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

THIRTY-NINE WEEK PERIOD ENDED NOVEMBER 2, 1997 ("YEAR-TO-DATE 1997") COMPARED
WITH THIRTY-NINE WEEK PERIOD ENDED OCTOBER 27, 1996 ("YEAR-TO-DATE 1996").

Net sales increased 11.9% for the Year-to-Date 1997 compared to the Year-to-Date
1996. The total sales increase was a result of opening 8 net new stores since
October 27, 1996 and the positive impact of a 10.1% 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, toys and seasonal merchandise, offset in part by a decrease in
electronics, housewares and apparel. The customer count for the Year-to-Date
1997 increased 5.6% over the same period in the prior year.
<PAGE>   11
Sales from the 169 California stores open at November 2, 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 of 8.7% for the Year-to-Date 1997.

The gross profit margin of 42.7% for the Year-to-Date 1997, decreased from 42.9%
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 36.1% of sales for the Year-to-Date 1997 compared to
operating expenses of 38.0% 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 28.1% and 29.8% 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 continued to reduce
expenses as a percent of sales. Specific decreases were realized in: advertising
which included a one-time fall promotion in the Third Quarter 1996, and utility
expense which continued to decline as a result of savings achieved from energy
efficiency programs. Store payroll declined as a percent of sales in spite of
the state and federal minimum wage increases in March 1997 and September 1997.

Warehouse and administrative expenses were 8.0% and 8.2% 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 in fiscal 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 $3,629 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 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 $43,584 in stock during the
last four quarters ended November 2, 1997.
<PAGE>   12
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 $2,943 for the Year-to-Date 1997 compared to
an increase of $34,163 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 an escrow fund established in the prior year related to the fire at
the New Orleans distribution center on March 21, 1996.

As of November 2, 1997, the Company's long-term debt was 23.8% of equity and
total debt was 25.0% of equity. At October 27, 1996, long-term debt was 47.4%
and total debt was 56.6% 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 November 2, 1997 compared to October 27, 1996 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 November 2, 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 and
inventory needs due to strong sales demands and in preparation of the peak
seasonal selling period.

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 November 2, 1997, the Company had $30,000 outstanding
revolving debt under the Company's $175,000 committed credit facility. There was
$27,600 outstanding under the Company's uncommitted credit lines at November 2,
1997.

The Company's current ratio as of November 2, 1997 was 2.40 versus 1.80 at
fiscal year end 1996 and 2.53 at October 27, 1996. The decrease in the Company's
current ratio at November 2, 1997 compared to October 27, 1996 is due primarily
to an escrow account and an insurance receivable recorded in current assets as
of October 27, 1996 and accrued liabilities recorded as of November 2, 1997, all
related to the fire at the New Orleans distribution center.

For the nine months ended November 2, 1997, inventory turnover improved to 1.52
from 1.38 for the nine months ended October 27, 1996. This improvement in
inventory turnover reflects the Company's improved sales performance for the
first nine months of 1997 versus the first nine months of 1996.

MERGER AGREEMENT

On November 5, 1997 the Company announced that it had entered into a definitive
agreement with Consolidated to be acquired in a stock for stock merger.
<PAGE>   13
At the effective time of the merger all issued and outstanding Company shares of
common stock will be canceled and converted automatically into the right to
receive a number of duly authorized shares of Consolidated's common stock.

Under the terms of the merger agreement, Consolidated will issue between 0.88
and 1.00 shares of stock for each Company share. The final exchange ratio will
be based upon the average closing price per share of Consolidated's stock during
the twenty day period prior to the effective time of the merger. The transaction
is expected to close in January 1998.

Consolidated's management believes the merger will result in a number of
important synergies and it is expected that certain business functions of the
Company will be integrated into the operations of Consolidated following the
merger. Consolidated expects to take an estimated pre-tax charge to earnings of
approximately $75 million to $100 million relating to the cost of integrating
the two companies.

The merger will be accounted for as a pooling of interests and will be tax free
to the Company's shareholders. The transaction is subject to customary
conditions, including approval by both companies' shareholders and regulatory
agencies.

The merger is described in greater detail in the Company's Current Report on
Form 8-K dated November 7, 1997 filed with the Securities and Exchange
Commission (the "SEC"). In connection with the transaction, a joint proxy
statement and prospectus (the "Prospectus/Proxy Statement") has been filed with
the SEC and is expected to be mailed to the stockholders of both companies in
December. This Form 10-Q does not constitute an offer of any securities offered
in the Prospectus/Proxy Statement nor a solicitation of votes by any 
stockholder.

<PAGE>   14
                           PART II - OTHER INFORMATION



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 November 2, 1997.



<PAGE>   15
                                   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 o 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:  December 12, 1997