<PAGE>
 
================================================================================

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549-1004

                                  ____________

                                   FORM 10-Q

(MARK ONE)
          X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
         ---          THE SECURITIES EXCHANGE ACT OF 1934
                 FOR THE QUARTERLY PERIOD ENDED MARCH 29, 1997

                                       OR

               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
         ---          THE SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 0-17540


                         MONTGOMERY WARD HOLDING CORP.
             (Exact Name Of Registrant As Specified In Its charter)


             Delaware                           36-3571585
     (State Of Incorporation)      (I.R.S. Employer Identification No.)


     Montgomery Ward Plaza, Chicago, Illinois                 60671
     (Address Of Principal Executive Offices)               (Zip Code)


        Registrant's Telephone Number Including Area Code:  312/467-2000

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

     As of April 30, 1997 the Registrant had 18,324,522 shares of Class A Common
Stock and 25,000,000 shares of Class B Common Stock of the Registrant
outstanding.

================================================================================
<PAGE>
 
                        PART 1 - FINANCIAL INFORMATION


Item 1.  Financial Statements


                                     INDEX

                                                                         Page
Montgomery Ward Holding Corp.

   Consolidated Statement of Income...................................     2

   Consolidated Balance Sheet.........................................     3

   Consolidated Statement of Cash Flows...............................     4

   Notes to Consolidated Financial Statements.........................     6





                                       1
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                        CONSOLIDATED STATEMENT OF INCOME
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                         March 29,   March 30,
                                                            1997        1996
                                                         ---------   ---------
<S>                                                      <C>         <C>

(Millions, except per share amounts)

Revenues
  Net sales, including leased and
   licensed department sales...........................   $1,119      $1,253
  Direct response marketing revenues,
   including insurance.................................      210         182
                                                          ------      ------
     Total Revenues....................................    1,329       1,435
                                                          ------      ------

Costs and Expenses
  Cost of goods sold, including net
   occupancy and buying expense........................      997       1,038
  Operating, selling, general and
   administrative expenses, including
   benefits and losses of direct
   response operations (Note 4)........................      525         452
Interest expense.......................................       33          22
                                                          ------      ------
   Total Costs and Expenses...........................     1,555       1,512
                                                          ------      ------

Loss Before Income Taxes...............................     (226)        (77)
Income Tax Benefit.....................................      (85)        (29)
                                                          ------      ------

Net Loss...............................................     (141)        (48)
Preferred Stock Dividend Requirements (Note 5).........        3           3
                                                          ------      ------

Net Loss Applicable to
 Common Shareholders...................................   $ (144)     $  (51)
                                                          ======      ======

Net Loss per Common Share (Note 2)
 Class A...............................................   $(3.71)     $(1.27)
 Class B...............................................   $(3.05)     $(1.07)

Cash dividends per Common Share........................   $    -      $    -

</TABLE>

                See notes to consolidated financial statements.

                                       2
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                           CONSOLIDATED BALANCE SHEET
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                         March 29,  December 28,
                                                           1997         1996
                                                         ---------  -----------

                                     ASSETS
(Millions)

<S>                                                       <C>       <C>
Cash and cash equivalents...........................      $   96      $   32
Short-term investments..............................           4           3
Investments of insurance operations.................         276         317
                                                          ------      ------
     Total Cash and Investments.....................         376         352

Trade and other accounts receivable.................         174         213
Accounts and notes receivable from affiliates.......          11          13
                                                          ------      ------
     Total Receivables..............................         185         226

Merchandise inventories.............................       1,402       1,545
Prepaid pension cost................................         355         351
Properties, plant and equipment, net of
 accumulated depreciation and amortization..........       1,297       1,308
Direct response and insurance acquisition costs.....         599         603
Other assets........................................         510         494
Prepaid deferred income taxes.......................          44           -
                                                          ------      ------
     Total Assets...................................      $4,768      $4,879
                                                          ======      ======

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Short-term debt.....................................      $1,437      $1,028
Trade accounts payable..............................       1,340       1,585
Federal income taxes payable........................           4           4
Accrued liabilities and other obligations...........       1,148       1,228
Insurance policy claim reserves.....................         230         227
Long-term debt......................................          85          87
Obligations under capital leases....................          58          60
Deferred income taxes...............................           -          52
                                                          ------      ------
     Total Liabilities..............................       4,302       4,271

Commitments and Contingent Liabilities (Note 6)

Redeemable Preferred Stock (Note 5).................         175         175

Shareholders' Equity
 Common stock.......................................           1           1
 Capital in excess of par value.....................          53          53
 Retained earnings..................................         364         509
  Unrealized gain on marketable securities..........          12           9
  Less:  Treasury stock, at cost....................        (139)       (139)
                                                          ------      ------
       Total Shareholders' Equity...................         291         433
                                                          ------      ------
Total Liabilities and Shareholders' Equity..........      $4,768      $4,879
                                                          ======      ======

</TABLE>
                See notes to consolidated financial statements.

                                       3
<PAGE>

                         MONTGOMERY WARD HOLDING CORP.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>

                                                               For the 13-Week
                                                                 Period Ended
                                                            March 29,   March 30,
(Millions)                                                     1997        1996
                                                            ---------- ----------
<S>                                                         <C>         <C>
Cash flows from operating activities:
 Net loss.................................................  $  (141)    $  (48)
 Adjustments to reconcile net loss to net cash
  provided by (used for) operating activities:
   Depreciation and amortization..........................       31         31
   Amortization of Goodwill...............................        2          6
   Amortization of Direct response and
    insurance acquisition costs...........................       61         42
   Deferred income taxes..................................      (96)        -
                                                            -------     ------
     Net (loss) income adjusted for non-cash expenses.....     (143)        31
                                                            -------     ------
Changes in operating assets and liabilities:
 (Increase) decrease in:
    Trade and other accounts receivable...................       39         12
    Accounts and notes receivable from affiliates.........        2         10
    Merchandise inventories...............................      143        201
    Prepaid pension cost..................................       (4)        (4)
    Federal income taxes receivable, net..................        -        (31)
    Direct response insurance acquisition costs...........      (57)       (64)
    Other assets..........................................      (16)       (10)
  Increase (decrease) in:
    Trade accounts payable................................     (245)      (494)
    Accrued liabilities and other obligations.............      (77)       (57)
    Insurance policy claim reserves.......................        3          6
                                                            -------     ------
      Net cash used for operations........................     (355)      (400)
                                                            -------     ------
Cash flows from (used for) investing activities:
 Investment in Merchant Partners..........................        -         (2)
 Acquisition of Amoco Enterprises.........................        -       (102)
 Purchase of short-term investments.......................      (43)        (9)
 Purchase of investments of insurance operations..........     (101)      (104)
 Sale of short-term investments...........................       42          9
 Sale of investments of insurance operations..............      142        117
 Capital expenditures.....................................      (20)       (11)
 Disposition of properties, plant and
   equipment, net.........................................        -          1
                                                            -------     ------
      Net cash from (used for) investing activities.......  $    20     $ (101)
                                                            -------     ------
</TABLE>
                See notes to consolidated financial statements.

                                       4
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                        For the 13-Week
                                                         Period Ended
                                                     March 29,   March 30,
(Millions)                                              1997        1996
                                                     ---------   ---------
<S>                                                  <C>         <C>

Cash flows from financing activities:
 Proceeds from short-term borrowings, net.........    $ 409        $ 541
 Payments of long-term debt.......................       (2)          (1)
 Payments of obligations under capital leases.....       (2)          (1)
 Proceeds from issuance of common stock...........        -            1
 Cash dividends paid..............................       (6)          (3)
 Purchase of treasury stock, at cost..............        -          (10)
                                                     ---------   ---------
   Net cash provided by financing activities......      399          527
                                                     ---------   ---------


Increase in cash and cash equivalents.............       64           26
Cash and cash equivalents at beginning of period..       32           37
                                                     ---------   ---------
Cash and cash equivalents at end of period........    $  96        $  63
                                                     =========   =========

Supplemental disclosure of cash flow information:
 Cash paid during the period for:
  Income taxes....................................    $   -        $   1
  Interest........................................    $  19        $  23


Non-cash investing activity:
 Change in unrealized gain on marketable
  equity securities...............................    $   3        $   -

Non-cash financing activity:
 Notes issued for purchase of treasury stock......    $   -        $   5
</TABLE>

                See notes to consolidated financial statements.


                                       5
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Millions of dollars, except per share amounts)


1.   Accounting Policies
 
     Basis of Presentation

     The Consolidated Balance Sheet as of March 29, 1997 and the Statements of
     Income and Cash Flows for the three months ended March 29, 1997 and March
     30, 1996 are unaudited. The interim financial statements reflect all
     adjustments (consisting only of normal recurring accruals) which are, in
     the opinion of management, necessary for a fair statement of the results
     for the interim periods presented. The interim financial statements should
     be read in the context of the financial statements and notes thereto filed
     with the Securities and Exchange Commission in the 1996 Annual Report on
     Form 10-K of Montgomery Ward Holding Corp. (the "Company"). Capitalized
     terms not otherwise defined herein have the meaning ascribed to such terms
     in the 1996 Annual Report on Form 10-K. Certain prior period amounts have
     been reclassified to be comparable with the current period presentation.

2.   Net (Loss) Per Common Share

     Net (Loss) per common share is computed as follows:

                                                       For the 13-Week
                                                        Period Ended
                                                       March 29, 1997


                                                   Class A       Class B
     Net (Loss) applicable to Common                $(68)         $(76)
     Shareholders......................

     Weighted average number of common
     shares outstanding........................   18,326,019   25,000,000

     Net (Loss) per share................          $(3.71)       $3.05)

                                                       For the 13-Week
                                                        Period Ended
                                                       March 30, 1996

                                                   Class A       Class B
     Net Loss applicable to Common                  $(24)         $(27)
     Shareholders......................

     Weighted average number of common
     shares outstanding.......................    19,155,678   25,000,000

     Net (Loss) per share................          $(1.27)       $(1.07)


     
     In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standard (SFAS) No. 128, "Earnings per Share." The
     statement is effective for financial statements for periods ending after
     December 15, 1997, and changes the method in which earnings per share will
     be determined and presented in the financial statements. Adoption of this
     statement by the Company will not have a material impact on earnings per
     share.

                                       6
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Millions of dollars, except per share amounts)


3.   Liquidity

     The Company had a net loss of $141 for the 13-week period ending March 29,
     1997 and its short term debt increased by $409 from December 28, 1996. An
     amendment to the Company's bank agreements was required at year end 1996
     and was obtained. Due to the Company's worsening financial condition,
     waivers were required and obtained for the first quarter of 1997. It will
     likely be necessary for the Company to obtain amendments or waivers with
     respect to the second quarter of fiscal 1997.

     The Company intends to improve its financial condition and reduce its
     dependence on borrowing by slowing expansion, controlling expenses, closing
     certain unprofitable stores and continuing to implement its inventory
     reduction program. Management is in the process of reevaluating the
     Company's merchandising, marketing, store operations and real estate
     strategies. The Company is also considering the sale of certain operating
     units as a means of generating cash. The Company is actively involved in
     negotiations with respect to the sale of certain of these units, including
     The Signature Group. Future cash is also expected to continue to be
     provided by ongoing operations, sales of receivables under the Agreements
     with Monogram Credit Card Bank of Georgia ("Monogram") and Montgomery Ward
     Credit Corporation ("MWCC"), borrowings under revolving loan facilities and
     vendor financing programs.

     The Company is currently in discussions with financing sources with a view
     toward a longer term solution to its liquidity problems and obtaining
     refinancing for all or a substantial portion of its outstanding
     indebtedness, including a total of $1,437 which will mature on or about
     August 29, 1997. This would include repayment of the current bank
     borrowings and amounts outstanding under the Note Purchase Agreements. The
     Company's management is highly confident that the indebtedness can be
     refinanced. The Company's largest shareholder, GE Capital, also expects the
     Company to be able to refinance such indebtedness. However, there can be no
     assurance that such refinancing can be obtained or, if obtained, will be on
     terms favorable to the Company or that amendments or waivers required to
     maintain compliance with the existing agreements can be obtained.

4.   Insurance, Benefits and Losses

     Operating, selling, general and administrative expenses include benefits
     and losses related to direct response marketing operations of $34 and $39
     for the 13-week periods ended March 29, 1997 and March 30, 1996,
     respectively.

                                       7
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Millions of dollars, except per share amounts)


5.   Preferred Stock

     On January 31, 1996, GE Capital exercised an exchange option which allowed
     it to exchange the MW Senior Preferred Stock for senior preferred stock of
     the Company with substantially the same terms. On March 28, 1996, the
     Company's Certificate of Incorporation was amended to authorize the
     issuance of a new series of senior preferred stock (New Senior Preferred
     Stock). On March 29, 1996, the Company issued all of the 1,750 shares of
     New Senior Preferred Stock to General Electric Capital Corporation ("GE
     Capital") in exchange for the 1,750 shares of MW Senior Preferred Stock
     held by GE Capital.

     Dividends on the New Senior Preferred Stock are payable quarterly at an
     annual rate of $7,010 per share. The Company is required to redeem the New
     Senior Preferred Stock on June 30, 2002, with the option of redeeming all
     or any portion prior to June 30, 2002.

6.   Commitments and Contingent Liabilities

     MW Holding, Montgomery Ward and its subsidiaries are engaged in various
     litigation and have a number of unresolved claims. While the amounts
     claimed are substantial and the ultimate liability with respect to such
     litigation and claims cannot be determined at this time, management is of
     the opinion that such liability, to the extent not provided for through
     insurance or otherwise, is not likely to have a material impact on the
     financial condition and the results of operations of the Company.

     On April 29, 1997 the Company, Montgomery Ward and Lechmere, were served
     with a complaint, purporting to represent a nationwide class, filed by
     certain bankrupt credit card holders of Montgomery Ward and Lechmere credit
     cards. The complaint alleged that the Company, Montgomery Ward and Lechmere
     benefited from the actions taken by Hurley State Bank ("Hurley"),
     Lechmere's previous credit card provider, MWCC and Monogram (both of which
     are affiliates of GE Capital), and Montgomery Ward's and Lechmere's current
     credit card providers in that the recoveries received from the bankrupt
     credit card holders, allegedly in violation of the bankruptcy laws dealing
     with reaffirmations ultimately reduced Montgomery Ward's and Lechmere's
     loss sharing obligations. Hurley, MWCC and Monogram took all actions
     related to such bankruptcy reaffirmations and neither the Company nor any
     of its subsidiaries took any such actions. Management believes that the
     indemnification obligations contained in its various agreements with Hurley
     and with MWCC and Monogram will relieve Lechmere, Montgomery Ward and the
     Company of any financial obligations related to the acts alleged in the
     complaint.

                                       8
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Millions of dollars, except per share amounts)


7.   Customer Credit Agreement

     Montgomery Ward entered into a Bank Credit Card Program Agreement (Card
     Agreement) effective April 1, 1996 with Monogram and an Account-Related
     Agreement (Account Related Agreement) effective April 1, 1996 with MWCC
     (collectively referred to as the Agreements) pursuant to which Monogram and
     MWCC (collectively referred to as the "Montgomery Ward Credit Companies"),
     both of which are affiliates of GE Capital, make payments to Montgomery
     Ward as to the receivables generated by sales to customers of Montgomery
     Ward, its affiliates and licensees who utilize the Montgomery Ward private
     label credit card, and pursuant to which Agreements the Montgomery Ward
     Credit Companies provide services to Montgomery Ward. Under the Agreements,
     Monogram has the exclusive right to operate the Montgomery Ward private
     label credit card system and the obligation to pay to Montgomery Ward the
     face amount of Monogram's receivables generated by the Montgomery Ward
     private label credit card system, up to $7,000 outstanding at any time. If
     Montgomery Ward desires to receive payment for receivables generated by the
     Montgomery Ward private label credit card system at any time when
     Montgomery Ward Credit Companies own $7,000 or more of such receivables and
     do not desire to finance additional receivables, alternative arrangements,
     such as the sale of receivables to banks or other financial institutions,
     would be required unless Monogram agrees to fund the excess.

     Montgomery Ward's subsidiary, Lechmere entered into an Interim Consumer
     Credit Card Program Agreement (Lechmere Agreement) effective March 13, 1996
     with Monogram pursuant to which Monogram makes payments to Lechmere in the
     face amount of Monogram's receivables generated by sales to customers of
     Lechmere who utilize the Lechmere private label credit card system that is
     provided by Monogram pursuant to the Lechmere Agreement. (The Lechmere
     Agreement provides that it will terminate upon the earlier of May 31,
     1997 or the execution of a long-term agreement between the parties.) A term
     sheet was executed on March 7, 1997, outlining the major provisions that
     the parties intend to incorporate in the long-term agreement. The term
     sheet contemplates a long-term agreement for a fifteen year term which
     would continue thereafter from year to year unless either party gives ten
     years prior notice of its election to terminate. The term sheet further
     provides that Montgomery Ward will (i) be responsible for 50% of credit
     losses that are between 4.25% and 8.0% of average outstanding receivables,
     (ii) receive a one time payment of $3 million in consideration of entering
     into the agreement, (iii) be responsible for a payment to Monogram of
     approximately $2.5 million representing 50% of the reserve established when
     Monogram purchased the Lechmere portfolio from the previous provider of the
     Lechmere private label credit card, and (iv) receive 50% of the net income
     generated from the portfolio in excess of a 17.5% return.

     The performance of the respective obligations of MWCC and Monogram under
     the Agreements and the Lechmere Agreement have been guaranteed by GE
     Capital.

8.   Inventory 

     The Company changed its method of valuing inventory in 1996 from the retail
     inventory Last In-First Out (LIFO) method to the retail inventory First 
     In-First Out (FIFO) method. The impact of this change had no impact on the
     first quarter of 1996 results of operations as previously reported.

                                       9
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Millions of dollars, except per share amounts)


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations
 
     The following discussion and analysis of results of operations for the
     Company compares the first quarter of 1997 to the first quarter of 1996.
     All dollar amounts referred to in this discussion are in millions, and all
     income and expense items are shown before income taxes, unless specifically
     stated otherwise.

     The Company's business is seasonal, with approximately one third of the
     sales traditionally occurring in the fourth quarter. Accordingly, the
     results of operations for the first three months are not necessarily
     indicative of the results for the entire year.

     Forward-Looking Statements

     Information included in this Report on Form 10-Q may constitute forward-
     looking statements that involve a number of risks and uncertainties. From
     time to time, information provided by the Company or statements made by its
     employees may contain other forward-looking statements. Factors that could
     cause actual results to differ materially from the forward-looking
     statements include but are not limited to: general economic conditions
     including inflation, consumer debt levels, trade restrictions and interest
     rate fluctuations; competitive factors including pricing pressures,
     technological developments and products offered by competitors; inventory
     risks due to changes in market demand or the Company's business strategies;
     and changes in effective tax rates. Readers are cautioned not to place
     undue reliance on these forward-looking statements, which speak only as of
     the date made. The Company undertakes no obligation to publicly update or
     revise any forward-looking statements, whether as a result of new
     information, future events or otherwise.

Results of Operations

First Quarter 1997 Compared with First Quarter 1996

     The Company's performance reflected difficult competitive conditions with
     the consolidated net loss of $141, increasing $93 from the first quarter
     1996 net loss of $48. In the first quarter of 1996, the Company accelerated
     efforts to reduce and redeploy inventory to allow for a shift in focus to
     items the Company believes will provide higher turnover and improved
     merchandise assortments in the future. Aggressive markdowns and promotional
     advertising to liquidate inventory were continued in the first quarter of
     1997.

                                      10
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Millions of dollars, except per share amounts)


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (continued)

Results of Operations (continued)

First Quarter 1997 Compared with First Quarter 1996

     While these actions have had an adverse earnings impact, they are
     generating positive cash flows. The Company aggressively identified and
     began to liquidate discontinued and problem merchandise in the fourth
     quarter of 1996. The total amount of the inventory identified at the
     beginning of the fourth quarter of 1996 was more than $300. As of March 29,
     1997, $87 of this inventory remained, for which there was a reserve of $51
     available. The Company believes that the liquidation of this inventory
     should position it with balanced inventory assortments to execute its
     strategic plan in future periods. However, the Company anticipates that the
     trends resulting from competitive pressures underlying declining revenues
     and margin rates will continue in fiscal 1997. The consolidated net loss
     applicable to common shareholders was $144 versus $51 in the first quarter
     of 1996.

     Consolidated total revenues (net sales and direct response marketing
     revenues, including insurance) were $1,329 compared with $1,435 in the
     first quarter of 1996, decreasing by $106 or 7%. The $106 total revenue
     decrease consisted of a $134 decrease in net sales and a $28 increase in
     direct marketing revenues. The change in total net sales represented an 11%
     decline. Specifically, in the Montgomery Ward retail stores, Apparel sales
     declined 5%, Jewelry sales declined 5%, Home and Furniture sales declined
     10%, Electronics sales declined 24%, Appliances sales declined 4% and
     Automotive sales declined 14%. The Company believes that the decline in net
     sales in the first quarter of 1997 reflected a decline in market share
     compared to competitors. The increase in direct response marketing revenues
     was primarily due to increased clubs' membership.

     Gross margin (net sales less cost of goods sold) dollars were $122, a
     decrease of $93, or 43%, from the first quarter of 1996. This decrease was
     due to the gross margin impact of the decreased sales of $29, a decrease in
     the margin rate on sales of $62, and increased buying and other expenses of
     $2.

     Operating, selling, general and administrative expenses increased $73, or
     16%, from the first quarter of 1996. The increase is primarily due to
     increased payroll and other administrative expenses of Signature of $37;
     decreased income from the sale of product service contracts of $10;
     increased advertising and promotional costs of $8; and increased operating
     and other administrative expenses of Montgomery Ward and Lechmere of $18.

                                      11
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Millions of dollars, except per share amounts)


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations (continued)

Results of Operations (continued)

First Quarter 1997 Compared with First Quarter 1996 (continued)

     Net interest expense increased $11, or 50%, from the prior year. The
     increase is due to higher interest rates and increased borrowings resulting
     from a combination of higher average working capital levels and reduced
     cash flow resulting from slower than anticipated sales.

     Income tax benefit was $85 for 1997, as compared to an income tax benefit
     of $29 for the first quarter 1996.

Discussion of Financial Condition

     Montgomery Ward is the only subsidiary of the Company and, therefore,
     Montgomery Ward and its subsidiaries are the Company's sole source of
     funds.

     Net cash used in the Company's operating activities totaled $355 compared
     to $400 in the first quarter of 1996. The lower cash usage reflects a
     larger operating loss offset by a significantly lower cash payments related
     to accounts payable.

     As a result of the inventory reduction program and better management of
     receipts of inventory, inventory decreased by $143 from December 29, 1996.
     This was offset by a decrease in trade accounts payable of $245 and an
     expenditure for direct response and insurance acquisition costs of $57.

     Net cash generated in the Company's investing activities totaled $20 in the
     first quarter 1997, compared to net cash used of $101 in the first quarter
     of 1996. 1996 net cash used included Signature's acquisition of the Amoco 
     Motor Club.

     Net cash provided by financing activities totaled $399 for the first
     quarter of 1997, compared to $527 for the first quarter of 1996.

     Montgomery Ward has obtained waivers under the Long Term Credit Agreement
     (Long Term Agreement) and the Short Term Credit Agreement (Short Term
     Agreement) with respect to compliance for the fiscal quarter ending March
     29, 1997 with covenants requiring maintenance of minimum consolidated
     shareholders' equity, a minimum ratio of debt to capitalization and minimum
     earnings before interest, taxes, depreciation, amortization and rent
     (EBITDAR). These waivers and amendments also reduce the maximum of amount
     of debt permitted to be incurred by Signature and the maturity

                                      12
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Millions of dollars, except per share amounts)


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations (continued)

Discussion of Financial Condition (continued)

     of the Long Term Agreement was changed from February 15, 1998 to August 29,
     1997. Similar amendments to corresponding covenants in the Company's two
     Purchase and Master Lease Agreements were made.

     The Long Term Credit Agreement and the Short Term Credit Agreement were
     amended on December 23, 1996, to substitute the EBITDAR test for an
     earnings to fixed charges test for the three quarters ended June 28, 1997,
     to add a limitation on capital expenditures, to require prepayments if
     proceeds of certain asset dispositions are received and to amend the
     minimum debt to equity ratio required to permit payment of preferred stock
     dividends. In connection with these amendments the Company paid fees, the
     rates of interest under both agreements were increased in three stages, at
     the date of the agreement and effective at the end of the first and second
     quarters of 1997, the commitment fee was increased by 0.375% of the unused
     commitment and the maturity of the Long Term Agreement was changed to
     February 15, 1998 from September 6, 2000. These amendments also limited the
     amount of debt which can be incurred by Signature. Similar amendments to
     the corresponding covenants in the Company's two Purchase and Master Lease
     Agreements were made (including shortening the lease expiration dates to
     August 29, 1997) and the rents thereunder were increased.
 
     The Company entered into an amendment and waiver agreement with holders of
     the notes issued under the 1993 and 1995 Note Purchase Agreements, which
     included a waiver through June 27, 1997 of compliance with the minimum
     shareholders' equity test, added restrictions on the disposition of assets
     and the incurrence of debt and funded debt, required a mandatory prorata
     prepayment in the event of any prepayment of any loans or termination of
     bank commitments under the Long Term and Short Term Agreements and
     shortened the maturity dates of all Notes to August 29, 1997. In connection
     therewith the noteholders received fees and interest rates on the Notes
     were increased in two stages.

     Montgomery Ward also entered into a Credit Agreement (Seasonal Credit
     Agreement) dated as of October 4, 1996 with various lenders, including GE
     Capital. The Seasonal Credit Agreement expires August 29, 1997 and provides
     a revolving loan facility in the principal amount of $165. A waiver
     corresponding to those most recently obtained with respect to the Long Term
     and Short Term Agreements has been obtained by the Company. The

     
                                      13
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Millions of dollars, except per share amounts)


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations (continued)

Discussion of Financial Condition (continued)

     purpose of this facility is to provide back-up liquidity. Unless the
     lenders otherwise agree, loans may be made under this facility only after
     the commitments under the Short Term Agreement and the Long Term Agreement
     are fully used.

     It will likely be necessary for the Company to obtain amendments or waivers
     with respect to the second quarter of fiscal 1997.

     The Company intends to improve its financial condition and reduce its
     dependence on borrowing by slowing expansion, controlling expenses, closing
     certain unprofitable stores and continuing to implement its inventory
     reduction program. Management is in the process of reevaluating the
     Company's merchandising, marketing, store operations and real estate
     strategies. The Company is also considering the sale of certain operating
     units as a means of generating cash. The Company is actively involved in
     negotiations with respect to the sale of certain of these units, including
     The Signature Group. Future cash is also expected continue to be provided
     by ongoing operations, receipt of payment for credit sales under the
     Agreements with Montgomery Ward Credit Companies, borrowings under
     revolving loan facilities and vendor financing programs.

     The Company is currently in discussions with financing sources with a view
     toward a longer term solution to its liquidity problems and obtaining
     refinancing for all or a substantial portion of its outstanding
     indebtedness, including a total of $1,437 which will mature on or about
     August 29, 1997. This would include repayment of the current bank
     borrowings and amounts outstanding under the Note Purchase Agreements. The
     Company's management is highly confident that the indebtedness can be
     refinanced. The Company's largest shareholder, GE Capital, also expects the
     Company to be able to refinance such indebtedness. However, there can be no
     assurance that such refinancing can be obtained or that amendments or
     waivers required to maintain compliance with the existing agreements can be
     obtained.

     The Long Term Agreement provides a revolving facility in the principal
     amount of $603. As of March 29, 1997, $603 was outstanding under the Long
     Term Agreement.


                                       14
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Millions of dollars, except per share amounts)


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations (continued)

Discussion of Financial Condition (continued)

     The Short Term Agreement provides a revolving facility in the principal
     amount of $456. As of March 29, 1997, $456 was outstanding under the Short
     Term Agreement.

     The Seasonal Credit Agreement provides a revolving facility in the
     principal amount of $165. As of March 29, 1997, Montgomery Ward had no
     amounts outstanding under the Seasonal Credit Agreement.

     In 1997, Montgomery Ward has facilities under vendor financing programs
     (which are reflected in Trade Accounts Payable) which total $500. As of May
     13, 1997 this facility had been increased to an aggregate amount of $600.
     At March 29, 1997, these facilities were principally drawn. There was an
     increase in the facility of $150 in the first quarter of 1997.

     On March 29, 1997, Montgomery Ward had no amounts outstanding under the
     short term uncommitted lines of credit.


                                       15
<PAGE>
 
                          PART II - OTHER INFORMATION


Item 1.   Legal Proceedings.

     On April 29, 1997 the Company, Montgomery Ward and Lechmere, were served
     with a complaint, purporting to represent a nationwide class, filed by
     certain bankrupt credit card holders of Montgomery Ward and Lechmere credit
     cards. The complaint alleged that the Company, Montgomery Ward and
     Lechmere, benefited from the actions taken by Hurley, Lechmere's previous
     credit card provider, and MWCC and Monogram, (both of which are affiliates
     of GE Capital) Montgomery Ward's and Lechmere's current credit card
     providers, in that the recoveries received from the bankrupt credit card
     holders, allegedly were in violation of the bankruptcy laws dealing with
     reaffirmations ultimately reduced Montgomery Ward's and Lechmere's loss
     sharing obligations. Hurley, MWCC and Monogram took all actions related to
     such bankruptcy reaffirmations and neither the Company nor any of its
     subsidiaries took any such actions. Management believes that the
     indemnification obligations contained in its various agreements with
     Hurley, MWCC and Monogram will relieve Lechmere, Montgomery Ward and the
     Company of any financial obligations related to the acts alleged in the
     complaint.

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 on Form 8-K.

     (a)  Exhibits:

          10.(i)(A)(3)  Amendment No. 17 to Stockholders' Agreement, dated as of
                        March 31, 1997.


                                       16
<PAGE>
 
                          PART II - OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K (continued)

    (a)  Exhibits (continued):

         10.(i)(F)(2)   Limited Waiver and First Amendment to Note Purchase
                        Agreements dated as of March 29, 1997 among Montgomery
                        Ward & Co., Incorporated and various lenders.

         10.(i)(H)(5)   Waiver and Fourth Amendment to Long Term Credit
                        Agreement dated as of March 29, 1997 among Montgomery
                        Ward & Co., Incorporated and various banks.

         10.(i)(I)(6)   Waiver and Fourth Amendment to Short Term Credit
                        Agreement dated as of March 29, 1997 among Montgomery
                        Ward & Co., Incorporated and various banks.

         10.(i)(L)(2)   Waiver Letter dated as of March 27, 1997 addressed to 
                        Signature Financial/Marketing, Inc. from The Bank of New
                        York and The Bank of Nova Scotia.

         10.(i)(L)(3)   Correction Letter Agreement dated as of March 27, 1997
                        among Signature Financial/Marketing, Inc., The Bank of 
                        New York and The Bank of Nova Scotia.

         10.(i)(M)(3)   Waiver and Third Amendment to Credit Agreement dated as
                        of March 29, 1997 among Montgomery Ward & Co.,
                        Incorporated and various lenders.

         10.(iii)(C)    Waiver Letter of General Electric Capital Corporation
                        dated March 27, 1997.

         10.(iv)(D)(3)  Third Amendment to the Montgomery Ward & Co.,
                        Incorporated Retirement Security Plan.

         10.(xiv)       Employment Agreement dated April 11, 1997 between
                        Montgomery Ward & Co., Incorporated and Spencer H.
                        Heine.
                        
    27.  Financial Data Schedule.

    (b)  Reports on Form 8-K.

         On January 21, 1997, the Company filed a Form 8-K with respect to the
         appointment of Roger V. Goddu as Chief Executive Officer of the
         Company, the related resignations of three of the Company's directors
         and other matters.


                                       17
<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 thereunto duly authorized.


REGISTRANT            MONTGOMERY WARD HOLDING CORP.

 
BY                    JOHN L. WORKMAN
NAME AND TITLE        John L. Workman, Executive Vice President and
                      Chief Financial Officer
DATE:                 May  13, 1997

 

                                       18