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

         |X| QUARTERLY REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  For The Quarterly Period Ended May 2, 1998

                         Commission File Number: 21859

                           FACTORY CARD OUTLET CORP.
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

           DELAWARE                                    36-3652087
           --------                                    ----------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

                               2727 Diehl Road,
                          Naperville, IL 60563-2371
--------------------------------------------------------------------------------
              (Address of principal executive offices, zip code)

Registrant's telephone number, including area code: (630) 579-2000

Indicate by check mark whether this 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 |_|

The number of shares of the Registrant's Common Stock outstanding as of June 5,
1998 was 7,384,707.
<PAGE>
 
                           Factory Card Outlet Corp.

                                   Form 10-Q

                       For the Quarter Ended May 2, 1998
                                     Index
<TABLE>
<CAPTION>
                                                                                         Page
<S>        <C>                                                                         <C>
Part I     Financial Information

Item 1     Financial Statements (unaudited):

           Consolidated Balance Sheets as of May 2, 1998 and January 31, 1998                  3

           Consolidated Statements of Income for the three fiscal months
             ended May 2, 1998 and April 26, 1997                                              4

           Consolidated Statements of Cash Flows for the three fiscal months
             ended May 2, 1998 and April 26, 1997                                              5

           Notes to Consolidated Financial Statements                                        6-8

Item 2     Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                                       9-12

Item 3     Quantitative and Qualitative Disclosures About Market Risk                           *

Part II    Other Information                                                                   13

           Signatures                                                                          14
</TABLE>


  *        Not applicable

                                       2
<PAGE>
 
PART I - FINANCIAL INFORMATION, ITEM 1, FINANCIAL STATEMENTS

                           FACTORY CARD OUTLET CORP.
                                AND SUBSIDIARY

                          Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                        May 2,           January 31, 
                                                                                         1998                1998
                                                                                     ------------        ------------
                                       ASSETS                                        (Unaudited)
<S>                                                                                  <C>                 <C>
Current assets:
   Cash                                                                              $    164,208        $     30,373
   Receivables                                                                          1,041,295           2,008,604
   Inventories                                                                         79,096,752          72,911,489
   Prepaid expenses                                                                     1,581,123           1,773,130
   Deferred income taxes                                                                  331,307             331,307
                                                                                     ------------        ------------
       Total current assets                                                            82,214,685          77,054,903
Fixed assets, net                                                                      40,134,417          38,507,001
Deferred income taxes                                                                     493,353             493,353
Other assets                                                                              303,547             188,010
                                                                                     ------------        ------------
       Total assets                                                                  $123,146,002        $116,243,267
                                                                                     ============        ============
                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current maturities of long-term obligations                                       $  1,854,057        $  1,820,809
   Accounts payable                                                                    17,860,108          17,307,927
   Due to related parties                                                               4,032,508           2,942,979
   Income taxes payable                                                                   431,425                  -
   Accrued expenses                                                                     3,470,475           4,753,764
                                                                                     ------------        ------------
       Total current liabilities                                                       27,648,573          26,825,479
Revolving credit note payable                                                          34,968,277          29,700,000
Capital lease obligations                                                               2,192,690           2,667,836
Deferred rent liabilities                                                               5,909,289           5,315,820
                                                                                     ------------        ------------
      Total liabilities                                                                70,718,829          64,509,135
                                                                                     ------------        ------------
Stockholders' equity:
   Common stock - $.01 par value at May 2, 1998 and January 31, 1998.
      Voting class - authorized 15,000,000 shares; 7,380,691 and 7,335,519 shares
      issued and outstanding at May 2, 1998 and January 31, 1998, respectively.
      Non-voting class - authorized 205,000 shares, no shares issued or                    
      outstanding.                                                                         73,807              73,355
   Additional paid-in capital                                                          51,347,014          51,222,520
   Retained earnings                                                                    1,006,352             438,257
                                                                                     ------------        ------------
      Total stockholders' equity                                                       52,427,173          51,734,132
                                                                                     ------------        ------------
      Total liabilities and stockholders' equity                                     $123,146,002        $116,243,267
                                                                                     ============        ============
</TABLE>
See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
 
<TABLE>
<CAPTION>

                           FACTORY CARD OUTLET CORP.
                                AND SUBSIDIARY

                       Consolidated Statements of Income



                                                      Three fiscal months ended
                                                 ----------------------------------
                                                      May 2,            April 26,
                                                       1998                1997
                                                 --------------       -------------
                                                             (Unaudited)
<S>                                              <C>                  <C>

Net sales                                        $  49,862,055        $ 32,945,669
Cost of sales and occupancy                         32,183,185          20,458,881
                                                 --------------       -------------
   Gross profit                                     17,678,870          12,486,788
Selling, general and administrative expenses        15,950,583          11,713,091
                                                 --------------       -------------
   Income from operations                            1,728,287             773,697

Interest expense                                       781,463             126,844
                                                 --------------       -------------
   Income before taxes                                 946,824             646,853

Income taxes                                           378,729             271,679
                                                 --------------       -------------
   Net income                                    $     568,095        $    375,174
                                                 ==============       =============
Earnings per share -
   basic                                         $         .08        $        .05
                                                 ==============       =============
   diluted                                       $         .07        $        .05
                                                 ==============       =============
Weighted average shares outstanding -
   basic                                             7,354,386           7,210,791
                                                 ==============       =============
   diluted                                           8,096,974           7,988,643
                                                 ==============       =============

</TABLE>

See accompanying notes to consolidated financial statements.


                                       4
<PAGE>
 
                           FACTORY CARD OUTLET CORP.
                                AND SUBSIDIARY

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                             Three fiscal months ended
                                                                           -----------------------------
                                                                              May 2,         April 26,
                                                                               1998             1997
                                                                           ------------     ------------
<S>                                                                        <C>              <C>  
                                                                                    (Unaudited)
 Cash flows from operating activities:
    Net income                                                             $    568,095     $    375,174
    Adjustments to reconcile net income to net cash provided by (used
      in) operating activities:
      Depreciation and amortization of fixed assets                           1,611,923          979,285
      Loss on the disposal or retirement of fixed assets                        127,314          126,160
      Stock option compensation                                                  14,751           34,749
      Change in assets and liabilities:
        (Increase) decrease in assets:
          Accounts receivable                                                  (824,854)        (251,280)
          Inventories                                                        (6,185,263)      (4,270,184)
          Prepaid expenses                                                      192,007          112,900
          Other assets                                                         (115,537)         (40,135)
        Increase (decrease) in liabilities:
          Accounts payable                                                    3,433,872        3,495,127
          Accrued expenses                                                   (1,230,592)        (139,123)
          Deferred rent liabilities                                             593,469           48,366
          Income taxes payable                                                  378,729          262,722
                                                                           ------------     ------------
  Net cash (used in) provided by operating activities                        (1,436,086)         733,761
                                                                           ------------     ------------
  Net cash (used in) investing activities--purchase of fixed assets, net     (3,366,653)      (3,457,729)
                                                                           ------------     ------------
  Cash flows from financing activities:
    Borrowings under revolving credit note                                   24,638,034       13,500,000
    Repayment of borrowings under revolving credit note                     (19,369,757)     (10,330,000)
    Payment of long-term obligations                                           (441,898)        (160,410)
    Costs related to issuance of common stock                                        -          (374,193)
    Proceeds from exercise of employee stock options                            110,195           55,000
                                                                           ------------     ------------
Net cash provided by financing activities                                     4,936,574        2,690,397
                                                                           ------------     ------------
Net increase (decrease) in cash                                                 133,835          (33,571)
Cash at beginning of period                                                      30,373          287,771
                                                                           ------------     ------------
  Cash at end of period                                                    $    164,208     $    254,200
                                                                           ============     ============
</TABLE>
See accompanying notes to consolidated financial statements.
                                        
                                       5
<PAGE>
 
                           FACTORY CARD OUTLET CORP.
                                AND SUBSIDIARY

                  Notes to Consolidated Financial Statements
                                  (Unaudited)

(1)  Organization and Basis of Presentation

          The consolidated financial statements include the accounts of Factory
     Card Outlet Corp. and its wholly owned subsidiary, Factory Card Outlet of
     America, Ltd. (the "Company"). The Company is a chain of 193 company-owned
     superstores offering an extensive selection of party supplies, greeting
     cards, gift wrap and other special occasion merchandise at everyday value
     prices in 22 states as of May 2, 1998. These financial statements have been
     prepared by management without audit and should be read in conjunction with
     the consolidated financial statements and notes thereto for the transition
     period ended January 31, 1998. Due to the seasonality of the Company's
     business, the results for the interim periods are not necessarily
     indicative of the results for the year. The accompanying consolidated
     financial statements reflect, in the opinion of management, all adjustments
     necessary for a fair presentation of the interim financial statements. In
     the opinion of management, all such adjustments are of normal and recurring
     nature.
 
          All intercompany balances and transactions have been eliminated in
     consolidation.

2)   Management Estimates
 
          The preparation of these consolidated financial statements in
     conformity with generally accepted accounting principles requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities at the date of the financial statements
     and the reported amounts of revenues and expenses during the reporting
     period and related disclosures. Significant estimates made as of and for
     the three fiscal month periods ended May 2, 1998 and April 26, 1997 include
     provisions for shrinkage, capitalized overhead costs related to inventory
     and markdowns of merchandise inventories. Actual results could differ from
     those estimates.

(3)  Change in Fiscal Year

          In January 1998, the Company changed its fiscal year-end to the
     Saturday closest to January 31 which will be its fiscal year-end in the
     future. The Company's quarterly reporting periods have also changed.
 
(4)  Earnings Per Share
 
          In accordance with Statement of Financial Accounting Standards
     ("SFAS") No. 128, earnings per share - basic were computed by dividing net
     income by the weighted average number of common shares outstanding during
     the period. Earnings per share - diluted includes the effect of stock
     options and warrants.

                                       6
<PAGE>
 
     The reconciliation of earnings per share - basic to earnings per share -
     diluted is as follows:

<TABLE>
<CAPTION>

                                                                                       Income                    Per
                                                                                       (loss)      Shares       share
                                                                                     ----------  -----------    ------
<S>                                                                                  <C>         <C>            <C> 
For the three fiscal months ended May 2, 1998 -
Earnings per share - basic:
--------------------------
    Net income                                                                       $  568,095    7,354,386    $  .08
Effect of dilutive securities
    Stock options                                                                                    666,384
    Warrants                                                                                          76,204
                                                                                                 -----------
Earnings per share - diluted:
----------------------------
Net income available to common stockholders and assumed conversions                  $  568,095    8,096,974    $  .07
                                                                                     ==========  ===========    ======
For the three fiscal months ended April 26, 1997 -
Earnings per share - basic:
--------------------------
    Net income                                                                       $  375,174    7,210,791    $  .05
Effect of dilutive securities
    Stock options                                                                                    701,648
    Warrants                                                                                          76,204
                                                                                                 -----------
Earnings per share - diluted:
----------------------------
Net income available to common stockholders and assumed conversions                  $  375,174    7,988,643    $  .05
                                                                                     ==========  ===========    ======
</TABLE> 

          Options to purchase common stock outstanding during the periods
     presented above that were not included in the computation of diluted
     earnings per share - diluted because the option price was greater than the
     average market price of the common shares were as follows:

                              Period                         Shares
                              ------                         ------
          For the quarter ended May 2, 1998                  3,500
          For the transition period ended April 26, 1997     2,967
 
          During the quarter ended May 2, 1998, 45,172 shares were issued upon
     the exercise of stock options.

(5)  Revolving Credit Agreement

          On January 30, 1998, the Company entered into a Loan and Security
     Agreement ("Loan and Security Agreement") with BankBoston Retail Finance
     Inc. providing a $40,000,000 revolving line of credit which can be
     increased at the Company's discretion up to $60,000,000, in $5,000,000
     increments. Advances under the Loan and Security Agreement, which expires
     January 31, 2001, are limited based on inventory levels subject to certain
     reserves as defined in the Loan and Security Agreement. Interest is accrued
     at an annual rate equal to the BankBoston, N.A. prime rate or, at the
     Company's option, a rate based on the London Interbank Offered Rate
     ("LIBOR") plus additional basis points (175 or 200 basis points) dependent
     on the Company's trailing twelve-month net income. Interest is payable
     monthly or upon the expiration of an advance issued under the Company's
     LIBOR option. A fee of 0.25% per year is assessed monthly on the unused
     portion of

                                       7
<PAGE>
 
     the line of credit. Borrowings under the Loan and Security Agreement are
     secured by all of the Company's assets. This Loan and Security Agreement
     contains one restrictive financial covenant requiring a minimum net worth
     of $42,700,000. The Company had borrowings under this Loan and Security
     Agreement of $34,968,277 as of May 2, 1998.

(6)  Supplemental Cash Flow Information

<TABLE>
<CAPTION>
                                                                    Three fiscal months ended
                                                                    -------------------------
                                                                     May 2,         April 26,
                                                                      1998            1997
                                                                    ---------       ---------
<S>                                                                 <C>             <C> 
      Cash paid (received) during the period for the following:
          Interest                                                  $ 736,905        $113,040
          Income taxes                                               (205,303)          7,775
</TABLE>

     Supplemental disclosure of non-cash financing activities:

          Capital lease obligations incurred and notes payable issued for
     equipment and vehicle purchases for the three fiscal month period ended
     April 26, 1997 was $2.7 million.


                                       8
<PAGE>
 
ITEM 2    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     The following discussion and analysis contains certain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: ability to open and operate new stores; weather and economic
conditions; dependence on key personnel; competition; ability to anticipate
merchandise trends and consumer demand; ability to maintain relationships with
suppliers; successful implementation of information systems; successful handling
of merchandise logistics; inventory shrinkage; ability to meet future capital
needs; governmental regulations; ability to complete corrective action necessary
to address Year 2000 issues and other factors both referenced and not referenced
in this Quarterly Report on Form 10-Q. When used in this Quarterly Report on
Form 10-Q, the words "estimate", "project", "expect", "intend", "believe" and
similar expressions are intended to identify forward-looking statements.

     Due to the importance of the spring and fall seasons, the second and fourth
fiscal quarters have historically contributed, and the Company expects they will
continue to contribute, disproportionately to the Company's profitability for
the entire fiscal year. As a result, the Company's quarterly results of
operations may fluctuate. In addition, results of periods shorter than a full
year may not be indicative of results expected for the entire year.

     As of November 30, 1997, Party Express, the party goods division of
Hallmark Marketing Corporation, has refused to supply party goods, which include
many Disney and Warner Bros. licensed products, to the Company. The Company
believes that this decision will not have a material impact on its earnings for
the twelve-month period ended January 30, 1999, but could impact earnings beyond
that time. The Company is continuing to explore alternatives in an attempt to
resolve this situation or to allow the Company to acquire the licensed product
through other sources.

Results of Operations

     The following table sets forth, for the periods indicated, selected
statement of income data expressed as a percentage of net sales and the number
of stores open at the end of each such period:

<TABLE>
<CAPTION>
                                               Three fiscal months ended
                                               -------------------------
                                               May 2,          April 26,
                                                1998             1997
                                               ------         ----------
<S>                                            <C>            <C>
Net sales                                       100.0%          100.0%
Cost of sales and occupancy                      64.5            62.1 
                                                -----           ----- 
   Gross profit                                  35.5            37.9 
Selling, general and administrative expenses     32.0            35.5 
                                                -----           ----- 
   Income from operations                         3.5             2.4 
Interest expense                                  1.6             0.4 
                                                -----           ----- 
   Income before taxes                            1.9             2.0 
Income taxes                                      0.8             0.9
                                                -----           -----
   Net income                                     1.1%            1.1%
                                                =====           =====
Number of stores open at end of period           193             135
</TABLE>

                                       9

<PAGE>
 
Three Fiscal Months Ended May 2, 1998 and April 26, 1997

     Net Sales. Net sales increased $17.0 million, or 51.7%, to $49.9 million
for the three fiscal month period ended May 2, 1998 from $32.9 million for the
three fiscal month period ended April 26. 1997. The increase resulted from (i)
net sales of $2.5 million from new stores opened during the three-month period,
(ii) net sales increase of $13.5 million from stores opened prior to February
1998 not included in the comparable store base, and (iii) a comparable store
sales increase of $1.0 million, or 3.1%. Comparable store sales were impacted by
the uneven flow of basic stock merchandise resulting from system conversion
issues associated with the consolidation of the Company's distribution
facilities. The Company includes stores opened 13 or 14 months after their
opening date in the calculation of comparable sales. If the opening date of a
store falls in the first 14 days of a period, the store is included in the
comparable store calculation in its 13th month of operation; otherwise, a store
is included in the comparable store calculation in its 14th month of operation.

     Gross Profit. Cost of sales includes merchandise, store occupancy,
purchasing and distribution costs. Gross profit increased $5.2 million, or
41.6%, to $17.7 million for the three fiscal month period ended May 2, 1998 from
$12.5 million for the three fiscal month period ended April 26, 1997. As a
percentage of net sales, gross profit was 35.5% for the three fiscal month
period ended May 2, 1998 compared to 37.9% in the prior year. Gross profit as a
percentage of net sales decreased as a result of higher occupancy and other
fixed costs compared to lower comparable store sales partially offset by vendor
promotional program monies.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses include labor, advertising, depreciation, other store
operating and corporate administrative expenses. Selling, general and
administrative expenses increased $4.3 million, or 36.8%, to $16.0 million for
the three fiscal month period ended May 2, 1998 from $11.7 million for the three
fiscal month period ended April 26, 1997. Approximately $3.6 million of this
increase resulted from the operation of 58 additional new superstores. The
remainder of the increase in selling, general and administrative expenses
resulted primarily from higher salaries and related costs for additional field
and corporate management and administrative personnel to support additional
stores. As a percentage of net sales, selling, general and administrative
expenses decreased to 32.0% in the three fiscal month period ended May 2, 1998
from 35.6% in the three fiscal month period ended April 26, 1997.

     Interest Expense. Interest expense was $0.8 million in the three fiscal
month period ended May 2, 1998 compared to $0.1 million in the three fiscal
month period ended April 26, 1997. This increase resulted from higher borrowing
levels to support the opening of 58 new superstores and increased inventory
levels.

     Income Tax. The effective tax rate for the three fiscal month period ended
May 2, 1998 was 40.0% million compared to 42.0% during the three fiscal month
period ended April 26, 1997 as a result of state tax savings.

                                       10
<PAGE>
 
Liquidity and Capital Resources

     The Company's cash needs are primarily for working capital to support its
opening of new superstores and its inventory requirements. In recent years, the
Company has financed its expanding operations primarily through proceeds from
its initial public offering effective December 1996, borrowings under revolving
credit facilities, proceeds from issuances of convertible preferred stock and
subordinated debentures and internally generated funds. The Company's ability to
fund its activities is directly dependent upon its sales, its ability to
effectively manage its inventory and working capital needs and its ability to
obtain sufficient external financing to support its continued growth. While the
Company has been able to obtain sufficient external financing to date, no
assurance can be given that such financing, along with internally generated
funds, will be sufficient to support its continued growth.

     At May 2, 1998 and April 26, 1997, the Company's working capital was $54.4
million and $34.6 million, respectively. Net cash used in operations for the
three fiscal month period ended May 2, 1998 was $1.4 million compared to $0.7
million net cash provided for the three fiscal month period ended April 26,
1997. In these two periods, $6.2 million and $4.3 million, respectively, of cash
from operations was used to increase inventory levels to support both new and
existing stores.

     Net cash used in investing activities during the three fiscal month period
ended May 2, 1998 and April 26, 1997 was $3.4 million and $3.5 million,
respectively. These costs were primarily a result of opening new superstores,
investing in equipment for the new distribution center and investing in systems.
During the three fiscal month period ended May 2, 1998 and April 26, 1997, the
Company spent $1.7 million and $2.0 million, respectively, for capital
expenditures for new superstores.

     Net cash provided by financing activities during the three fiscal month
period ended May 2, 1998 and April 26, 1997 was $4.9 million and $2.7 million,
respectively. At May 2, 1998, the outstanding balance under the Loan and
Security Agreement with BankBoston Retail Finance Inc. ("Loan and Security
Agreement") was $35.0 million. At April 26, 1997, the outstanding balance under
the Company's Business Loan Agreement with Bank One, Chicago, NA was $3.6
million.

     On January 30, 1998 the Company entered into a Loan and Security Agreement
with BankBoston Retail Finance Inc. providing a $40,000,000 revolving line of
credit which can be increased at the Company's discretion up to $60,000,000, in
$5,000,000 increments. Advances under the Loan and Security Agreement, which
expires January 31, 2001, are limited based on inventory levels subject to
certain reserves as defined in the Loan and Security Agreement. Interest is
accrued at an annual rate equal to the BankBoston, N.A. prime rate or, at the
Company's option, a rate based on the London Interbank Offered Rate ("LIBOR")
plus additional basis points (175 or 200 basis points) dependent on the
Company's trailing twelve-month net income. Interest is payable monthly or upon
the expiration of an advance issued under the Company's LIBOR option. A fee of
0.25% per year is assessed monthly on the unused portion of the line of credit.
Borrowings under the Loan and Security Agreement are secured by all of the
Company's assets. The Loan and Security Agreement contains one restrictive
financial covenant requiring a minimum net worth of $42,700,000.

     Prior to the Agreement with BankBoston Retail Finance Inc., the Company
borrowed funds under a Loan and Security Agreement with Bank One Chicago, NA
("Bank One Agreement"). The Bank One Agreement allowed for borrowings of the
lesser of $35,000,000 or a predetermined advance rate (not to exceed 50%)
against net inventory as determined by an appraisal. Interest was payable at an
annual rate equal to the bank's prime rate or, at the Company's option, LIBOR
plus additional basis points (ranging from 125 to 225 points) dependent on the
Company's effective debt ratio. In addition, a fee of 0.25% per

                                       11
<PAGE>
 
year was assessed quarterly on the unused portion of the facility. The Bank One
Agreement contained restrictive covenants including, among others, the
maintenance of minimum ratios of fixed charges to earnings and maximum ratios of
liabilities to net worth and debt to earnings. The Bank One Agreement was
terminated upon the closing of the BankBoston Loan and Security Agreement.

     In December 1996, the Company completed an initial public offering of
2,550,000 shares of its common stock. An additional 394,050 shares of common
stock were sold as a result of the exercise by the underwriters of an over-
allotment option in January 1997. The net proceeds of the offering, which were
$22.9 million after deducting associated expenses, were used to retire all
outstanding subordinated debentures, a term loan and the outstanding borrowings
under the revolving credit facility.

     In October 1996, the Company entered into two capital lease agreements for
point-of-sale (POS) computer equipment and related software having a total cost
of $2.1 million. During February 1997, financing for $2.4 million of additional
POS equipment was incorporated into one of the leases. During July and August
1997, financing for $1.9 million of additional POS equipment was also
incorporated. These leases have terms of four and five years.

     The Company does not intend to pay cash dividends in the foreseeable future
and under its Loan and Security Agreement is restricted from paying dividends on
its capital stock.

                                       12
<PAGE>
 
PART II - OTHER INFORMATION

Item 1.   Legal Proceedings.

          None.

Item 2.   Changes in Securities.

          None.

Item 3.   Defaults Upon Senior Securities.

          None.

Item 4.   Submission of Matters to a Vote of Security Holders.

          None.

Item 5.   Other Information.

          None.

Item 6.   Exhibits and reports of Form 8-K

          (a)  Exhibits.
 
                    27.1  Financial Data Schedule.

          (b)  The following reports were filed on Form 8-K since January 31,
               1998.
 
                    Current Report on Form 8-K filed on May 29, 1998 to report
                    the appointment of Stewart Kasen as President and Chief
                    Executive Officer.

                                       13
<PAGE>
 
SIGNATURES

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

   

                                 FACTORY CARD OUTLET CORP.

Dated: June 15, 1998             By: /s/ Stewart M. Kasen
                                         ----------------
                                         Stewart M. Kasen
                                         Chairman of the Board,
                                         President and Chief Executive Officer



Dated: June 15, 1998             By: /s/ Glen J. Franchi
                                         ---------------
                                         Glen J. Franchi
                                         Executive Vice President,
                                         Treasurer, and Chief Operating Officer
                                         (principal financial officer)



Dated: June 15, 1998             By: /s/ Thomas W. Stoltz
                                         ----------------
                                         Thomas W. Stoltz
                                         Vice President - Finance
                                         (principal accounting officer)




                                      14