<PAGE>
 
                                   FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
 
 
(Mark One)
 
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act for 1934
 
For the quarterly period ended June 30, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act for 1934
 
For the Transition period from ______ to ______
Commission file number:  0-20736
                         -------

                              Sport Chalet, Inc.
-------------------------------------------------------------------------------
          (Exact name of registrant as specified in its charter)

          Delaware                                    95-4390071
-------------------------------------------------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

920 Foothill Boulevard,  La Canada                California  91011
-------------------------------------------------------------------------------
(Address of principal executive offices)                (Zip)

(818) 790-2717
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
(Former name former address and former fiscal year, if changes since last 
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   Yes  X      No
                                         ----       ----

                     APPLICABLE ONLY TO CORPORATE ISSUERS:


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date, August 1, 1998:

                                   6,525,000

                                       1
<PAGE>
 
                               SPORT CHALET, INC.
                               ------------------

                               Index to Form 10-Q

                                     Part I
                                     ------


1.  Item 1.  Condensed Financial Statements

2.  Item 2.  Management's Discussion and Analysis of Financial Condition and
             the Results of Operations



                                    Part II
                                    -------
                                        

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

2.  Item 6.  Exhibits and Reports on Form 8-K

                                       2
<PAGE>
 
                               SPORT CHALET, INC.
                               ------------------


                                     PART I
                                     ------


                                        
          ITEM 1.  CONDENSED FINANCIAL STATEMENTS.
                   ------------------------------

          The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Commission.

          Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading.  In the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for a
fair statement of results for the interim period have been made.

          It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's 1998 Annual Report to Shareholders filed with the Commission on June
30, 1998.

                                       3
<PAGE>
 
                               SPORT CHALET, INC.

                         CONDENSED STATEMENTS OF INCOME
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                           Three months ended June 30,
                                                                      -------------------------------------
                                                                             1998                   1997
                                                                      --------------        ----------------
<S>                                                                  <C>                        <C>
Net sales..........................................                       $32,097,240           $29,219,115
Cost of goods sold, buying and occupancy...........                        22,578,772            21,169,881                 
                                                                          -----------           -----------
Gross profit.......................................                         9,518,468             8,049,234 
Selling, general and administrative expenses........                        8,580,405             7,551,002
                                                                          -----------           -----------
Income from operations.............................                           938,063               498,232
Interest (income) expense..........................                           (26,654)               75,506 
                                                                          -----------           -----------
Income before taxes................................                           964,717               422,726 
Income tax provision...............................                           394,000               177,000
                                                                          -----------           -----------
Net income.........................................                       $   570,717           $   245,726
                                                                          ===========           ===========
Earnings per share:
             Basic.................................                       $       .09           $       .04
                                                                          ===========           ===========
             Diluted...............................                       $       .09           $       .04 
                                                                          ===========           ===========
Weighted average number
of common shares outstanding:
             Basic.................................                         6,525,000             6,500,000 
                                                                          ===========           ===========
             Diluted...............................                         6,676,000             6,500,000 
                                                                          ===========           ===========
</TABLE> 

                            SEE ACCOMPANYING NOTES.

                                       4
<PAGE>
 
                               SPORT CHALET, INC.

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               June 30,          March 31,
                                                                                1998               1998 
                                                                             -----------        ----------
                                                                             (Unaudited)
<S>                                                                           <C>                <C> 
ASSETS
------
Current assets:
  Cash............................................................            $3,096,273        $4,970,335
  Accounts receivable - net.......................................               162,575           409,635         
  Merchandise inventories.........................................            30,616,969        27,812,058         
  Prepaid expenses and other current assets.......................               146,474           205,297         
  Deferred and refundable income taxes............................             1,415,921         1,809,921         
                                                                             -----------       -----------         
          Total current assets....................................            35,438,212        35,207,246         
Furniture, equipment and leasehold improvements - net.............            13,966,219        13,443,937         
Other assets (note 2).............................................               710,859            66,730         
                                                                             ------------      -----------         
          Total assets............................................           $50,115,290       $48,717,913         
                                                                             ============      ===========         
                                                                                                                   
LIABILITIES AND SHAREHOLDERS' EQUITY                                                                               
------------------------------------                                                                               
Current liabilities:                                                                                               
Accounts payable..................................................           $10,872,382       $9,610,860          
Salaries and wages payable........................................             1,680,242        2,842,807          
Other accrued expenses............................................             5,280,055        4,552,352          
                                                                             -----------      -----------          
          Total current liabilities...............................            17,832,679       17,006,019          
Deferred income taxes.............................................               191,225          191,225          
Shareholders' equity                                                                                               
Preferred stock, $.01 par value:                                                                                   
Authorized shares - 2,000,000                                                                                      
Issued and outstanding shares - none                                                                               
Common stock, $.01 par value:                                                                                      
Authorized shares - 15,000,000                                                                                     
Issued and outstanding shares - 6,525,000......................                   65,250           65,250          
Additional paid-in capital.....................................               21,486,677       21,486,677          
Retained earnings..............................................               10,539,459        9,968,742          
                                                                             -----------      -----------      
Total shareholders' equity.....................................               32,091,386       31,520,669          
                                                                             -----------      -----------         
Total liabilities and shareholders' equity                                   $50,115,290      $48,717,913       
                                                                             ===========      ===========       
</TABLE>    

                            SEE ACCOMPANYING NOTES.

                                       5
<PAGE>
 
                               SPORT CHALET, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                           Three months ended June 30,
                                                                                        -------------------------------
                                                                                           1998                 1997
                                                                                        ---------             ---------
<S>                                                                                     <C>                   <C> 
OPERATING ACTIVITIES
Net income............................................................                  $570,717               $245,726 
Adjustments to reconcile net income to net cash provided                                                   
  by (used in) operating activities:                                                                         
      Depreciation and amortization...................................                   777,000                679,500 
                                                                                                           
      Deferred income taxes...........................................                   394,000                425,051   
      Changes in operating assets and liabilities:                                                               
           Accounts receivable........................................                   247,060                237,221 
           Merchandise inventories....................................                (2,804,911)            (2,385,856) 
           Prepaid expenses and other current assets..................                    58,823                187,958 
           Accounts payable...........................................                 1,261,522                282,085
           Salaries and wages expenses................................                (1,162,565)              (662,288)
           Other accrued expenses.....................................                   727,703                 85,762 
           Income tax payable.........................................                        --               (324,000) 
                                                                                     -----------            -----------     
Net cash provided by (used in) operating activities...................                    69,349             (1,228,841) 
                                                                                          
INVESTING ACTIVITIES
Other assets..........................................................                  (644,129)                    --
Purchase of furniture, equipment and leasehold improvements...........                (1,299,282)              (267,816)
                                                                                     -----------            -----------     
Net cash used in investing activities.................................                (1,943,411)              (267,816) 
                                                                                      
FINANCING ACTIVITIES
Proceeds from bank borrowings.........................................                        --             22,676,252 
Principal payments on bank loans......................................                        --            (21,108,366) 
                                                                                     -----------            -----------     
Net cash provided by financing activities.............................                        --              1,567,886
                                                                                               
Increase (decrease) in cash...........................................                (1,874,062)                71,229
Cash at beginning of period...........................................                 4,970,335                451,114
                                                                                     -----------            -----------     
Cash at end of period.................................................               $ 3,096,273            $   522,343
                                                                                     ===========            ===========
Cash paid during the year for:
     Income taxes.....................................................                 $      --                $75,842
     Interest.........................................................                        --                 75,506
</TABLE> 

                            SEE ACCOMPANYING NOTES.

                                       6
<PAGE>
 
                               SPORT CHALET, INC.

                          NOTE TO FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                        

1.  For a summary of significant accounting policies and other information which
    relates to these interim statements, reference should be made to the notes
    to financial statements included in the Company's 1998 Annual Report to
    Shareholders.


2.  On March 31, 1998, the Principal Shareholder and his spouse, through their
    Family Trust, awarded 293,625 unregistered shares of common stock to certain
    employees and Directors. In conjunction with this award, loans were granted
    to Company employees to pay income taxes. These loans bear interest at 6%
    and are payable over four years and secured by the awarded shares.

                                       7
<PAGE>
 
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE
           -------------------------------------------------------------------- 
           RESULTS OF OPERATIONS.
           ----------------------

     The following should be read in conjunction with the Company's financial
statements and related note thereto provided under Item 1 above.

     THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE
30, 1997.  Sales are up 9.9%, $32.1 million compared to $29.2 million for the
same quarter last year.  Comparable store sales are up 6.8%, primarily due to
unseasonably cool weather resulting in increased demand for winter-related
merchandise during April 1998 over the same month last year.  In addition, one
new store was opened in San Diego during June 1998 and one in Laguna Niguel
during November 1997, while the under-performing El Cajon store was closed in
September 1997.

     Gross profit as a percent of sales increased to 29.7% compared to 27.6% for
the same period last year, as a result of reduced cost of sales as well as
reductions in inventory shrink accruals.

     Selling, general and administrative expenses as a percent of sales
increased from 25.8% to 26.7%, primarily the result of new store opening
expenses.

     The Company recorded interest income of $27,000 this quarter as opposed to
$76,000 interest expense during the same quarter last year because no money was
borrowed during the three months ended June 30, 1998.

     The effective income tax rate was 40.8% compared to 41.9% for the same
period last year.  These rates differ from the statutory rate of 40.1% as a
result of permanent differences between financial reporting and tax-basis
income.

     Net income increased from $246,000 or $.04 per diluted share to $571,000 or
$.09 per diluted share, primarily as a result of increased sales and gross
profit, partially offset by new store opening expenses.

     The Company's business is highly seasonal in nature and historically
its highest sales level and operating profitability occur during the winter
months of November, December and January, which overlap the third and fourth
fiscal quarters, and Management therefore believes that the operating results
for the first quarter may not necessarily be indicative of the Company's overall
operating results for the fiscal year.

                                       8
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

          The Company's primary capital requirements are for inventory and store
openings, relocations and remodeling.  Historically, the Company's liquidity
needs have been met by cash from operations, credit terms from vendors and bank
borrowings.  The Company believes that these sources will be sufficient to fund
currently anticipated cash requirements for the next 2 to 3 fiscal years.

          Net cash provided by operating activities is $69,000 for the three
months ended June 30, 1998 compared to net cash used of $1.2 million for the
same period ended June 30, 1997.  Net income provided $571,000 and $246,000 for
the three months ended June 30, 1998 and 1997, respectively.  Depreciation also
provided $777,000 and $680,000 of cash for the same periods.

          Inventories increased by $2.8 million and $2.4 million for the three
months ended June 30, 1998 and 1997, respectively, due to the seasonal build-up
of summer inventory. Accounts payable increased by $1.2 million and $282,000 for
the respective quarters due primarily to inventory build-up and the timing of
payments to vendors.

          Net cash used in investing activities increased to $1.9 million from
$268,000 for the quarters ended June 30, 1998 and 1997, respectively, primarily
due to the opening of one new store during June 1998 and loans made to certain
employees pursuant to the March 31, 1998 stock award described in Note 2 to the
Condensed Financial Statements set forth in Item 1.

          Net cash provided by financing activities has primarily reflected
advances or pay down of the Company's revolving credit line.  There were no
borrowings during the quarter ended June 30, 1998, while $1.6 million of cash
was borrowed during the three months ended June 30, 1997.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

          The statements which are not historical facts contained in this
Quarterly Report on Form 10-Q are "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties.  The words "anticipate", "believes", "expect", "intend", "may",
or similar expressions used in this Quarterly Report as they relate to the
Company or its Management are generally intended to identify such forward
looking statements.  These risks and uncertainties contained in this Quarterly
Report include but are not limited to, product demand and market acceptance
risks, the effect of economic conditions generally and in Southern California,
and retail and sporting goods business conditions specifically, the impact of
competition, technological difficulties, capacity and supply constraints or
difficulties, the results of financing efforts, changes in consumer preferences
and trends, the effect of the Company's accounting policies, weather conditions,
acts of God, and other risks detailed in the Company's Security and Exchange
Commission filings.

                                       9
<PAGE>
 
                                    PART II
                                        

     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
              ----------------------------------------------------

     At the annual meeting of shareholders on August 6, 1998, the two Class
3 Directors, Norbert J. Olberz and Kenneth Olsen, were re-elected to the
Company's Board of Directors.  There were 6,155,445 votes for and 288,585 votes
withheld for Norbert J. Olberz and 6,161,845 votes for and 282,185 votes
withheld for Kenneth Olsen.  The Company's Class 1 Director, Eric S. Olberz, and
Class 2 Director, John R. Attwood, continue to serve on the Board.  The terms of
the Class 1, 2 and 3 Directors presently expire in fiscal year 2000, 2001 and
2002, respectively.

     The shareholders also voted to ratify the amendment of the 1992 Incentive
Award Plan to increase (i) the number of available shares and the number of
automatic option grants to non-employee Directors which will be automatically
granted upon being elected or reelected to the Board of Directors and (ii) the
maximum number of option shares such non-employee Directors may receive and
(iii) to extend the term of said Plan to October 31, 2012. The vote was
5,722,208 for, 308,974 against and 4,452 abstained.

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

         (a)  Exhibits
 
              10.1  Employment Contract for Ronald G. Mann
              27.1  Financial Data Schedule

         (b)  Reports on Form 8-K.

              During the quarter for which this report on Form 10-Q is filed, no
              reports on Form 8-K were filed.

                                       10
<PAGE>
 
                                   SIGNATURE



          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 duly authorized officer and principal financial officer.


                                          SPORT CHALET, INC.



DATE:    August 7, 1998                   /s/ Norbert J. Olberz
                                          ------------------------------------
                                          Norbert J. Olberz
                                          Chairman of the Board and
                                          Interim Chief Executive Officer
                                          (Duly Authorized Officer)



DATE:    August 7, 1998                   /s/ Howard K. Kaminsky   
                                          -------------------------------------
                                          Howard K. Kaminsky
                                          Senior Vice President-Finance, Chief
                                          Financial Officer, and Secretary
               (Principal Financial and Accounting Officer)

                                       11