<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C.  20549-1004
                                        
                                 ____________

                                   FORM 10-Q
                                        

           [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED OCTOBER 3, 1998

                                      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 November 13, 1998 the Registrant had 18,322,152 shares of Class A Common
Stock and 25,000,000 shares of Class B Common Stock outstanding.
<PAGE>
 
                         Montgomery Ward Holding Corp.
                     For the Quarter Ended October 3, 1998
                                        
                    Index to Quarterly Report on Form 10-Q



<TABLE>
<CAPTION>
                                                                          Page
 
<S>                                                                       <C>
Part I -  Financial Information.
 
Item 1.   Financial Statements (Unaudited).

          Consolidated Statements of Income.                                  3
          Consolidated Balance Sheets.                                        4
          Consolidated Statements of Cash Flows.                              5
          Notes to Consolidated Financial Statements.                         7
 
Item 2.   Management's Discussion and Analysis of Financial                  13
          Condition and Results of Operations.
 
Part II - Other Information.                                                 19
</TABLE>

                                       2
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                     For the 13-week                   For the 39-week
                                                                      Periods Ended                     Periods Ended
                                                             -----------------------------       ----------------------------
                                                              Oct. 3,           Sept. 27,          Oct. 3,         Sept. 27,
(In millions, except per share amounts)                         1998              1997              1998              1997
                                                             ----------        -----------       ----------        ----------
<S>                                                          <C>               <C>               <C>               <C>
Revenues
  Net sales, including leased and licensed department sales     $   815            $   947          $ 2,428           $ 3,217
  Direct response marketing revenues, including insurance           206                214              639               638
                                                             ----------         ----------       ----------        ----------
    Total Revenues                                                1,021              1,161            3,067             3,855
                                                             ----------         ----------       ----------        ----------
Costs and expenses
  Cost of goods sold, including net occupancy and
    buying expense                                                  683                805            1,986             2,872
  Operating, selling, general and administrative expenses,
    including benefits and losses of direct response
    operations (Note 5)                                             457                533            1,342             1,645
  Interest expense                                                   16                 17               44               103
                                                             ----------         ----------       ----------        ----------
    Total Costs and Expenses                                      1,156              1,355            3,372             4,620
                                                             ----------         ----------       ----------        ----------
Loss before Reorganization Costs and Income Taxes                  (135)              (194)            (305)             (765)
Reorganization Costs (Note 6)                                        21                582               95               582
                                                             ----------         ----------       ----------        ----------
Loss before Income Taxes                                           (156)              (776)            (400)           (1,347)
Income Tax Expense (Benefit) (Note 7)                               306               (161)             306              (375)
                                                             ----------         ----------       ----------        ----------
Net Loss                                                           (462)              (615)            (706)             (972)
Preferred Stock Dividend Requirements                                 -                  -                -                 8
                                                             ----------         ----------       ----------        ----------
Net Loss Applicable to Common Shareholders                      $  (462)           $  (615)         $  (706)          $  (980)
                                                             ==========         ==========       ==========        ==========
Net Loss per Common Share (Note 8)
  Class A                                                       $(12.53)           $(17.17)         $(19.18)          $(27.37)
  Class B                                                         (9.25)            (11.99)          (14.16)           (19.12)

                                          See notes to consolidated financial statements.
</TABLE>

                                       3
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                        October 3,   January 3,
(In millions)                                              1998         1998
                                                        -----------  ----------
                                                        (Unaudited)
<S>                                                         <C>         <C>
Assets
    Cash and cash equivalents                            $    104     $    189
    Short-term investments                                      1            1
    Investments of insurance operations                       357          358
                                                         --------     --------
      Total cash and investments                              462          548

    Trade and other accounts receivable                       283          234
    Accounts and notes receivable from affiliates              10            6
                                                         --------     --------
      Total Receivables                                       293          240

    Merchandise inventories                                 1,124        1,120
    Prepaid pension cost                                      393          366
    Properties, plant and equipment, net of
      accumulated depreciation and amortization             1,049        1,088
    Direct response and insurance acquisition costs           521          559
    Other assets                                              280          352
    Deferred income taxes                                       -          299
                                                         --------     --------
      Total Assets                                       $  4,122     $  4,572
                                                         ========     ========

Liabilities
    Short-term debt (Note 3)                             $    443     $    102
    Trade accounts payable                                    441          442
    Accrued liabilities and other obligations                 742          736
    Insurance policy claim reserves                           243          241
    Long-term debt                                             70          122
    Liabilities subject to compromise (Note 4)              3,429        3,468
                                                         --------     --------
      Total Liabilities                                     5,368        5,111

Commitments and Contingent Liabilities (Note 9)

Redeemable Preferred Stock                                    177          177

Shareholders' Deficit
    Common stock                                                1            1
    Capital in excess of par value                             65           64
    Retained deficit                                       (1,357)        (651)
    Unrealized gain on marketable equity securities             7            9
    Less:  Treasury stock, at cost                           (139)        (139)
                                                         --------     --------
      Total Shareholders' Deficit                          (1,423)        (716)
                                                         --------     --------
      Total Liabilities and Shareholders' Deficit        $  4,122     $  4,572
                                                         ========     ========
</TABLE>

               See notes to consolidated financial statements. 

                                       4
<PAGE>

                         MONTGOMERY WARD HOLDING CORP.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                              For the 39-Week
                                                                                                               Periods Ended
                                                                                                      ------------------------------
                                                                                                       October 3,      September 27,
(In millions)                                                                                             1998              1997
                                                                                                      ------------     -------------
<S>                                                                                                   <C>              <C>
Cash flows used for operating activities:
Net loss                                                                                              $      (706)     $       (972)
Adjustments to reconcile net loss to net cash used for operating
 activities:
    Provision for disposition of assets of Lechmere, Inc.                                                       -               280
    Provision for closing of Montgomery Ward and Electric Avenue &
      More Stores                                                                                               -               260
    Net receipts of cash relating to disposition of assets of
     Lechmere, Inc. and closing of Wards and Electric Avenue & More stores                                     44               104
    Provision for reorganization costs                                                                         34                 -
    Depreciation and goodwill amortization                                                                     85               104
    Amortization of direct response and insurance acquisition costs                                           177               184
    Deferred income taxes                                                                                     299              (375)
    Provision for loss on sale of interest in ValueVision
     International, Inc. Common stock                                                                           -                23
    Other                                                                                                       2                 -
Changes in operating assets and liabilities:
    Trade and other accounts receivable                                                                       (49)              (49)
    Accounts and notes receivable from affiliates                                                              (4)               (3)
    Merchandise inventories                                                                                    (7)              254
    Prepaid pension cost                                                                                      (27)              (13)
    Direct response and insurance acquisition costs                                                          (139)             (156)
    Other assets                                                                                               25                 3
    Trade accounts payable                                                                                     37               219
    Accrued liabilities and other obligations                                                                 (16)              (33)
    Insurance policy claim reserves                                                                             2                10
    Liabilities subject to compromise                                                                         (43)                -
                                                                                                      ------------     -------------
      Net cash used for operating activities                                                                 (286)             (160)
                                                                                                      ------------     -------------

Cash flows used for investing activities:
    Purchase of investments of insurance operations                                                          (664)             (517)
    Sale of investments of insurance operations                                                               663               528
    Purchase of short-term investments                                                                         (1)              (85)
    Sale of short-term investments                                                                              1                87
    Capital expenditures                                                                                      (67)              (47)
    Disposition of properties, plants and equipment, net                                                        1                 5
                                                                                                      ------------     -------------
      Net cash used for investing activities                                                          $       (67)     $        (29)
                                                                                                      ------------     -------------
</TABLE>
                See notes to consolidated financial statements.

                                       5


<PAGE>
                         MONTGOMERY WARD HOLDING CORP.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                 For the 39-Week
                                                                                  Periods Ended
                                                                           ----------------------------
                                                                           October 3,     September 27,
(In millions)                                                                 1998            1997
                                                                           ----------     -------------
<S>                                                                        <C>            <C>
Cash flows provided by financing activities:
    Borrowings under Post-Petition Loan and Guaranty Agreement, net          $ 392            $   -
    Restricted cash applied as payments under Long Term Credit
      Agreement                                                                (14)               -
    Proceeds from (payments of) short-term borrowings, net                    (102)             409
    Payments of long-term debt                                                  (1)              (5)
    Payments of obligations under capital leases                                (7)              (5)
    Cash dividends paid                                                          -               (4)
                                                                             -----            -----
      Net cash provided by financing activities                                268              395
                                                                             -----            -----
Increase (decrease) in cash and cash equivalents                               (85)             206
Cash and cash equivalents at beginning of period                               189               32
                                                                             -----            -----
Cash and cash equivalents at end of period                                   $ 104            $ 238
                                                                             =====            =====
Supplemental disclosure of cash flow information:
      Income taxes paid                                                      $   5            $   -
      Interest paid                                                             33               69
Non-cash investing activity:
    Change in unrealized gain on marketable equity securities                $ (2)            $  (2)
</TABLE>

                See notes to consolidated financial statements.

                                       6
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


1.   Accounting Policies
 
Basis of Presentation

     The accompanying consolidated financial statements are unaudited. The
     consolidated 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 consolidated financial statements should be read in
     conjunction with the consolidated financial statements and notes thereto
     filed with the Securities and Exchange Commission in the 1997 Annual Report
     on Form 10-K of Montgomery Ward Holding Corp. ("MW Holding" or, together
     with its subsidiaries, the "Company"). Capitalized terms not otherwise
     defined herein have the meaning ascribed to such terms in the 1997 Annual
     Report on Form 10-K. Certain prior period amounts have been reclassified to
     be comparable with the current period presentation.

Comprehensive Income

     In 1998, the Company adopted Statement of Financial Accounting Standards
     No. 130 ("SFAS 130"), Reporting Comprehensive Income. This statement
     establishes rules for the reporting of comprehensive income and its
     components. Comprehensive income (loss) consists of net income (loss) plus
     unrealized holding gains and losses on available-for-sale securities. The
     adoption of SFAS 130 had no impact on total shareholders' equity.
     Comprehensive loss was $463 million and $611 million for the quarterly
     periods ended October 3, 1998 and September 27, 1997, respectively, and
     $706 million and $974 million for the 39-week periods then ended,
     respectively.

2.   Reorganization

     At the close of business on July 7, 1997 (the "Petition Date"), MW Holding
     and certain of its U.S. subsidiaries filed petitions for reorganization
     under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy
     Court for the District of Delaware. These related proceedings are being
     jointly administered under the caption "In re Montgomery Ward Holding
     Corp., a Delaware corporation, et. al.", Case No. 97-1409 (PJW). The
     following U.S. subsidiaries were not included in the bankruptcy filings:
     Signature Financial/Marketing, Inc. and its direct and indirect
     subsidiaries ("Signature"); Marinco Insurance U.S.A., Inc. ("Marinco"); and
     Montgomery Ward Foundation.

     The Company expects to reorganize its affairs under the protection of
     Chapter 11 and to propose a Chapter 11 plan of reorganization for itself
     and the other filing subsidiaries, including Montgomery Ward & Co.,
     Incorporated ("Wards"). The Bankruptcy Court has granted the Company's
     request to extend its exclusive right to file a plan of reorganization
     through February 26, 1999. Although management expects to file a plan of
     reorganization in 1999, which would contemplate emergence in 1999, there
     can be no assurance at this time that a plan of reorganization will be
     proposed by the Company or approved or confirmed by the Bankruptcy Court,
     or that such plan will be consummated. After the expiration of the
     exclusivity period, creditors of the Company have the right to propose
     alternative plans of reorganization. Any plan of reorganization, among
     other things, is likely to result in elimination of the equity of existing
     shareholders, as a result of the issuance of equity to creditors or new
     investors.

                                       7

<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


2.   Reorganization (continued)

     The accompanying financial statements have been prepared on a going concern
     basis, which contemplates continuity of operations, realization of assets
     and liquidation of liabilities in the ordinary course of business. However,
     as a result of the Chapter 11 filing and circumstances relating to this
     event, including the Company's leveraged financial structure and losses
     from operations, such realization of assets and liquidation of liabilities
     is subject to uncertainty. While under the protection of Chapter 11, the
     Company may sell or otherwise dispose of assets, and liquidate or settle
     liabilities, for amounts other than those reflected in the financial
     statements. Further, a plan of reorganization could materially change the
     amounts reported in the financial statements, which do not give effect to
     all adjustments of the carrying value of assets or liabilities that might
     be necessary as a consequence of a plan of reorganization.
 
     The appropriateness of using the going concern basis is dependent upon,
     among other things, confirmation of a plan of reorganization, future
     profitable operations, the ability to comply with the terms of the DIP
     Facility and the ability to generate sufficient cash from operations and
     financing arrangements to meet obligations.

3.   Short-term Debt

     On September 15, 1998, the Company received approval from the Bankruptcy
     Court to permit Lechmere to lend Signature the funds to repay its
     borrowings of $102 under a Credit Agreement between Signature and various
     lenders, plus interest and other fees associated with the extension and
     refinancing of such agreement. On September 30, 1998, Signature's loan
     under the Credit Agreement was repaid from the $105 of funds advanced by
     Lechmere to Signature. The Lechmere Loan to Signature, which accrues
     interest at either the prime rate plus 1.75% or the LIBO rate plus 2.75%,
     is secured by a pledge of stock of certain Signature subsidiaries and is
     guaranteed by Wards. Such guarantee is subordinate to the DIP Facility. The
     loan shall become immediately due upon the earliest of (i) upon demand;
     (ii) the effective date of a plan of reorganization for the debtor
     subsidiary; (iii) the conversion of the bankruptcy case from a Chapter 11
     case to a Chapter 7 case under the Bankruptcy Code; (iv) the sale of all or
     substantially all of Signature's assets, the merger or consolidation of
     Signature with or into another entity, or the sale of more than 50% of an
     interest in Signature to another entity; or (v) December 31, 1999.

                                       8

<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


4. Liabilities Subject to Compromise

   The principal categories of claims classified as liabilities subject to
   compromise under reorganization proceedings are identified below. All amounts
   below may be subject to future adjustment depending on Bankruptcy Court
   action, further developments with respect to disputed claims, determination
   as to the value of any collateral securing claims, or other events.
   Additional claims may arise resulting from rejection of additional executory
   contracts or unexpired leases by the Company.

<TABLE>
<CAPTION>
                                                October 3,       January 3,
(In millions)                                     1998              1998
                                              -------------     ------------
                                                                
<S>                                                  <C>              <C>
Accounts payable                                     $1,377           $1,372
Long Term Credit Agreement                              603              603
Short Term Credit Agreement                             442              456
Note Purchase Agreements                                276              276
Other Long-term Debt                                      9                9
Obligations under capital leases                         44               51
Lease and other contract rejection claims               106              104
Other liabilities                                       572              597
                                              -------------     ------------
                                                     $3,429           $3,468
                                              =============     ============
</TABLE>

   The Company has $79 million of liabilities due Signature and Marinco which
   have been eliminated in consolidation but are subject to compromise.

   As a result of the bankruptcy filing, no principal or interest payments will
   be made on any pre-petition debt without Bankruptcy Court approval or until a
   reorganization plan defining the repayment terms has been approved. In June
   1998, upon approval of the Bankruptcy Court, cash held in segregated accounts
   by various banks, who were lenders to the Company under the Long Term Credit
   Agreement and Short Term Credit Agreement, totaling $24 million was offset
   against pre-petition debt ($14 million) and interest ($10 million) claims.

   Contractual interest expense not recorded on certain pre-petition debt
   totaled $31 million and $92 million for the 13-week and 39-week periods ended
   October 3, 1998, respectively, and $28 million for the 13-week and 39-week
   periods ended September 27, 1997.

5. Insurance, Benefits and Losses

   Operating, selling, general and administrative expenses include benefits and
   losses related to direct response marketing operations of $35 million and $38
   million for the 13-week periods ended October 3, 1998 and September 27 1997,
   respectively, and $100 million and $109 million for the 39-week periods then
   ended, respectively.

                                       9
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


6. Reorganization Costs

   Reorganization costs recorded in fiscal 1998 consisted of the following (in
   millions):
 
<TABLE>
<CAPTION>
                                                                                                            13-Week and
                                                  13-Week                        39-Week                       39-Week
                                               Period Ended                   Period Ended                  Periods Ended
                                                October 3,                     October 3,                   September 27,
                                                   1998                           1998                           1997
                                            ------------------             -------------------           -------------------- 
  <S>                                       <C>                            <C>                           <C>
  Store closings                                   $        -                   $        26                   $         540
  Interim Account Agreement Fees (Note10)                   9                            21                               -
  Professional fees                                         4                            14                               8
  Distribution center closings                              6                            14                               -
  Other                                                     4                            25                              36
  Interest income                                          (2)                           (5)                             (2)
                                            ------------------             -------------------           -------------------- 
                                                   $       21                   $        95                   $         582
                                            ==================             ===================           ==================== 
</TABLE>

   In June 1998, the Bankruptcy Court approved a motion filed by Wards to close
   nine underperforming stores.  The Company recorded a pre-tax charge of $26
   million associated with the closing of these stores.  In 1997, the Bankruptcy
   Court approved motions filed by Wards to close 92 retail stores and
   liquidation and outlet centers, as a result of the Company's decision to exit
   its non-core retail business and close certain underperforming stores.  The
   Company recorded a pre-tax charge of $540 million associated with the closing
   of these stores.  The charges included losses and costs associated with the
   liquidation of assets, lease rejection claims, severance payments, and other
   related expenses.

   Professional fees incurred consisted of consulting and legal fees for
   bankruptcy activity and restructuring efforts on behalf of the Company and
   Creditors' Committee.

   Restructuring of distribution facilities includes expenses associated with
   the closing and downsizing of facilities including the losses on liquidation
   of assets, lease rejection claims, severance payments, and other related
   expenses.

   Other reorganization costs represent expenses associated with retention
   bonuses not yet paid, the exit of certain product lines and other expenses.

                                       10
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


7. Income Taxes

   The Company currently has tax benefits and credits exceeding $700 million. At
   year-end 1997, management evaluated the realizability of the tax
   carryforwards and established a valuation reserve based upon its tax planning
   strategy of selling certain appreciated, non-operating assets, prior to
   emerging from Chapter 11, to avoid the carryforwards expiring without being
   used.

   During the third quarter of 1998, management determined that the tax benefits
   will more likely be realized through emergence from bankruptcy and the
   related expected restructuring of liabilities. As a result of the foregoing,
   as of October 3, 1998, the Company believes that it is appropriate to
   increase its valuation reserve and has recorded income tax expense of $299 in
   the third quarter, since the financial statements do not give effect to
   adjustments that might result from a plan of reorganization. The impact of
   the income tax charge has no effect on current or future years' operating
   performance or cash flows.

8. Net Loss Per Common Share

  Net loss per common share is computed as follows:
<TABLE>
<CAPTION>
                                                          For the 13-Week                                 For the 13-Week
                                                            Period Ended                                   Period Ended
                                                          October 3, 1998                               September 27, 1997
                                            -----------------------------------------       ----------------------------------------
<S>                                           <C>                     <C>                     <C>                     <C>
(In millions, except share and per
  share amounts)                                  Class A                 Class B                 Class A                Class B
                                            -----------------       -----------------       -----------------       ----------------
Net loss applicable to common
   shareholders                                 $      (230)            $      (232)            $      (315)           $      (300)
Weighted-average number of common
   shares outstanding                            18,322,152              25,000,000              18,322,247             25,000,000
Net loss per share                              $    (12.53)            $     (9.25)            $    (17.17)           $    (11.99)
</TABLE>

<TABLE>
<CAPTION>
                                                         For the 39-Week                              For the 39-Week
                                                           Period Ended                                 Period Ended
                                                         October 3, 1998                             September 27, 1997
                                            ---------------------------------------       -------------------------------------
(In millions, except share and per
  share amounts)                                 Class A                Class B                Class A               Class B
                                            ----------------       ----------------       ---------------       ---------------
<S>                                           <C>                    <C>                    <C>                   <C>
Net loss applicable to common
   shareholders                                        $(352)                 $(354)                $(502)                $(478)
Weighted-average number of common
   shares outstanding                              18,322,180              25,000,000             18,322,247             25,000,000
Net loss per share                                $    (19.18)            $    (14.16)           $    (27.37)           $    (19.12)
</TABLE>
  Basic and diluted earnings per share are the same for the 13-week and 39-week
  periods ended October 3, 1998 and September 27, 1997, as all common stock
  equivalents are antidilutive due to the net loss incurred during these
  periods.

                                       11
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


9.  Commitments and Contingent Liabilities

    MW Holding, Wards and its subsidiaries are engaged in various litigation and
    have a number of unresolved claims, as set forth in the 1997 Annual Report
    on Form 10-K. 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.

10. Customer Credit Agreements

    On April 3, 1998, the Bankruptcy Court approved an interim amendment to the
    Bank Program and Account-Related Agreements ("Interim Account Agreement")
    that provides the Company the ability to utilize the private label credit
    card through the expected duration of the Company's Chapter 11 status. The
    Interim Account Agreement provides for additional payments to Montgomery
    Ward Credit Corporation ("Montgomery Ward Credit"), an affiliate of General
    Electric Capital Corporation, of $2.5 million for the months of January 1998
    through June 1998, $3.0 million per month for the remainder of 1998, $2.5
    million per month from January 1999 though June 1999, and $2.0 million per
    month from July 1999 through December 1999.

    Wards is obligated to make all such payments through December 1999, except
    in the circumstance where the Company would be liquidated, then payments
    shall be made through the later of the date of termination or the last
    Thursday in June 1999. The Interim Account Agreement will terminate on the
    earliest of the following events: (a) the date the Bankruptcy Court enters
    an order for rejection of the Agreements, (b) the sale of the portfolio of
    receivables covered by the Agreements, (c) the date the Bankruptcy Court
    enters an order for assumption of the Agreements, provided Montgomery Ward
    Credit may withdraw its consent to assumption at any time prior to such an
    order, (d) if the Bankruptcy Court enters an order after March 18, 1998,
    whereby over 100 retail stores are to close, (e) upon adoption by the
    Company's or Wards' Board of Directors a resolution for liquidation, or (f)
    December 31, 1999.

                                       12
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

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 third quarter of 1998 to the third quarter of 1997, as
    well as the first nine months of 1998 to the first nine months of 1997. 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 quarter 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: Bankruptcy Court actions or
    proceedings related to the bankruptcy, 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

Third Quarter 1998 Compared with Third Quarter 1997

    Consolidated total revenues (net sales and direct response marketing
    revenues, including insurance) were $1,021, compared with $1,161 in the
    third quarter 1997, decreasing by $140, or 12%. The $140 total revenue
    decrease consisted of a $132 decrease in net sales (a 14% decrease) and a $8
    decrease in direct marketing response revenues (a 4% decrease). Sales on a
    comparable store basis increased approximately 3% after adjusting for the
    closing of stores and the exit of certain product lines. The decrease in net
    sales is attributable to the closing of nine retail stores in the third
    quarter of 1998 and 101 retail stores and liquidation and outlet centers in
    the second half of 1997, as a result of the Company's decision to exit its
    non-core retail businesses and to close certain underperforming Wards retail
    stores. These closed stores reported net sales of $137 in the third quarter
    of 1997. The sales decrease was also caused by the Company's decision to
    exit certain product offerings which reported sales of $16 in the third
    quarter of 1997. The decrease in direct marketing response revenues was due
    primarily to a decline in insurance and clubs membership revenues
    attributable primarily to a decrease in active Wards private label credit
    card accounts.

                                      13
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

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

Results of Operations (continued)

Third Quarter 1998 Compared with Third Quarter 1997 (continued)

    Gross margin (net sales less cost of goods sold) dollars were $132, a
    decrease of $10, or 7%, from the third quarter 1997. This decrease was due
    to the gross margin impact of decreased sales of $30 and a decrease in the
    gross margin rate on sales of $4, offset by decreased occupancy and other
    margin-related expenses of $24 primarily related to the closed stores.

    Operating, selling, general and administrative expenses decreased $76, or
    14%, from the third quarter 1997. The decrease was due to decreased bad debt
    expense of $30, decreased payroll costs primarily related to the closing of
    the Wards and Electric Avenue & More stores of $20, decreased advertising
    and other promotional costs of $15, 1997 operating, selling, general and
    administrative costs incurred by Lechmere of $9, and a decrease in all other
    costs of $9, offset by decreased product service income of $7.

    Income tax expense of $306 was recorded for the third quarter of 1998 as
    compared to a benefit of $161 for the third quarter of 1997. The third
    quarter 1998 expense is due to the increase in the valuation reserve as
    discussed in Note 7.

First Nine Months of 1998 Compared with First Nine Months of 1997

    Consolidated total revenues (net sales and direct response marketing
    revenues, including insurance) were $3,067, compared with $3,855 in the
    first nine months of 1997, decreasing by $788, or 20%. The $788 total
    revenue decrease consisted of a $789 decrease in net sales (a 25% decrease)
    and a $1 increase in direct marketing revenues. Sales on a comparable store
    basis decreased approximately 4% after adjusting for the closing of stores
    and the exit of certain product lines. The decrease in net sales is
    attributable to the closing of nine retail stores in the third quarter of
    1998 and 101 retail stores and liquidation and outlet centers in the second
    half of 1997, as a result of the Company's decision to exit its non-core
    retail businesses and to close certain underperforming Wards retail stores.
    These closed stores reported net sales of $631 in the first nine months of
    1997. The sales decrease was also caused by the Company's decision to exit
    certain product offerings which reported sales of $69 in the first nine
    months of 1997. Wards' management also believes that the decline in
    promotional offers to Wards' credit cardholders and an aggressive markdown
    and promotional advertising strategy to liquidate inventory during the first
    six months of 1997 contributed to the 1998 year-to-date sales decrease.
 
    Gross margin (net sales less cost of goods sold) dollars were $442, an
    increase of $97, or 28%, from the first nine months of 1997. This increase
    was due to an increase in the gross margin rate on sales of $226 and
    decreased occupancy and other margin-related expenses of $90 primarily
    related to the closed stores, offset by the gross margin impact of decreased
    sales of $219. The improvement of 7 percentage points in the gross margin
    rate in the first nine months of 1998 as compared to the first nine months
    of 1997 was due the effects of the increase in the margin rates in all
    categories of merchandise and the impact of closing Lechmere and Electric
    Avenue & More stores, which historically reported lower gross margin rates,
    as well as the negative impact of the aggressive markdowns strategy employed
    in the first six months of 1997 to liquidate inventories.

                                      14
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

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

First Nine Months of 1998 Compared with First Nine Months of 1997 (continued)

  Operating, selling, general and administrative expenses decreased $303, or
  18%, from the first nine months of 1997. The decrease was primarily due to
  decreased payroll costs primarily related to the closing of the Wards and
  Electric Avenue & More stores of $93, the closing of the Lechmere stores of
  $89, decreased advertising and other promotional costs of $72, write-downs of
  investments and other unrealizable assets in the prior year of $42, increased
  pension income of $11, decreased bad debt expense of $10, and a decrease in
  all other costs of $13, offset by decreased product service income of $27.

  Net interest expense decreased $59, or 57%, from the prior year. The Company
  stopped accruing interest on its pre-petition short-term debt in connection
  with the Chapter 11 filing. The weighted-average borrowings for the first nine
  months of 1998, excluding pre-petition debt, decreased by approximately $600
  as compared to the first nine months of 1997.

  Income tax expense of $306 was recorded for the first nine months of 1998 as
  compared to a benefit of $375 for the first nine months of 1997. See "Third
  Quarter 1998 Compared with the Third Quarter 1997" for further discussion.

Discussion of Financial Condition

  As discussed in Note 2 to the Consolidated Financial Statements, due to the
  inability of Wards to negotiate an out-of-court settlement with its lenders,
  MW Holding and certain of its subsidiaries have filed petitions for
  reorganization under Chapter 11 of the U.S. Bankruptcy Court. As a result of
  the Chapter 11 filing the Company and those subsidiaries have ceased making
  certain debt, interest, trade payable and other liability payments that arose
  prior to the Chapter 11 filing. Payments related to these liabilities are
  deferred, in most cases, until a plan for reorganization is confirmed by the
  Bankruptcy Court.

  Net cash used in the Company's operating activities totaled $286 for the first
  nine months of 1998 compared to $160 for the first nine months of 1997, an
  increase of $126. The higher cash usage is summarized as follows:

<TABLE>
<S>                                                          <C>
           Cash impact of smaller operating loss             $ 387
           Decrease in cash received from facility closings    (60)
           Lower cash provided by inventory                   (261)
           Lower cash provided by accounts payable            (182)
           All other cash from operations                      (10)
                                                             -----
                                                             $(126)
                                                             =====
</TABLE>
                                                                                
  The lower cash provided by inventory was due to the significant amount of
  discontinued merchandise sold in the first six months of 1997 as part of the
  Company's effort to reduce discontinued merchandise. The lower cash provided
  by accounts payable was due to the effects of the bankruptcy filing in the
  third quarter of 1997.

                                       15
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

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

Discussion of Financial Condition (continued)

  Net cash used for investing activities totaled $67 for the first nine months
  of 1998, compared to $29 million for the first nine months of 1997. Capital
  expenditures were $67 for the first nine months of 1998 compared to $47 for
  the first nine months of 1997. The Company has capitalized $9 on the
  remodeling of three stores in the first nine months of 1998. These stores,
  unveiled in September 1998, will serve as the prototype for the remodeling of
  future stores. In September and October 1998, these three stores reflected
  sales increases over the prior year in excess of 30 percentage points above
  the combined performance of the entire chain during these months. The Company
  plans to spend $40 in 1999 related to the remodeling of stores.

  Net cash provided by financing activities totaled $268 for the first nine
  months of 1998, compared to $395 for the first nine months of 1997. The
  Company had borrowed to the full extent of its financing facilities (excluding
  the Seasonal Credit Agreement) prior to the Chapter 11 filing. Net borrowings
  under the DIP facility were $392 in the first nine months of 1998. Signature
  repaid its short-term borrowings of $102 with the funds loaned by Lechmere.

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

  Wards entered into the DIP Facility on July 8, 1997, as amended, which was
  approved by the Bankruptcy Court on July 31, 1997. Under the DIP Facility, the
  lenders have agreed to provide a revolving credit and letter of credit
  facility, the maximum amount of which is based on the book value of eligible
  inventory (as defined in the DIP Facility), the fair market value of eligible
  real property (as defined in the DIP Facility) and the earnings of Signature.
  In no case may borrowings exceed $1,000. Under the DIP Facility, Wards may
  select among several interest rate options, all of which are based on market
  rates plus a margin.

  A commitment fee is payable based on the unused amount of the facility. The
  facility expires on July 7, 1999, or earlier in the case of an event of
  default. Total borrowings outstanding were $443 and letters of credit
  outstanding were $141 at October 3, 1998. The Company had $395 of borrowing
  availability under the DIP Facility at October 3, 1998.


  On February 20, 1998, Wards obtained a waiver and second amendment to the DIP
  Facility (the "Waiver and Second Amendment Agreement") which was approved by
  the Bankruptcy Court on March 31, 1998. The Waiver and Second Amendment
  Agreement waived and amended certain provisions of the DIP Facility, including
  a reduction in the level of earnings required, as defined in the DIP
  Agreement.

  The Company is currently in default of the terms of each of the Long-Term
  Credit Agreement, the Short-Term Credit Agreement and the Note Purchase
  Agreements and no future amounts may be drawn thereunder. The Company was in
  default of the Seasonal Credit Agreement, which was terminated as a result of
  the Chapter 11 filings. There were no borrowings outstanding under this
  agreement.

                                      16
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

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

Discussion of Financial Condition (continued)

  On September 15, 1998, the Company received approval from the Bankruptcy Court
  to permit Lechmere to lend Signature the funds to repay its borrowings of $102
  under a Credit Agreement between Signature and various lenders, plus interest
  and other fees associated with the extension and refinancing of such
  agreement. On September 30, 1998, Signature's loan under the Credit Agreement
  was repaid from the $105 of funds advanced by Lechmere to Signature. The
  Lechmere Loan to Signature, which accrues interest at either the prime rate
  plus 1.75% or the LIBO rate plus 2.75%, is secured by a pledge of stock of
  certain Signature subsidiaries and is guaranteed by Wards. Such guarantee is
  subordinate to the DIP Facility. The loan shall become immediately due upon
  the earliest of (i) upon demand; (ii) the effective date of a plan of
  reorganization for the debtor subsidiary; (iii) the conversion of the
  bankruptcy case from a Chapter 11 case to a Chapter 7 case under the
  Bankruptcy Code; (iv) the sale of all or substantially all of Signature's
  assets, the merger or consolidation of Signature with or into another entity,
  or the sale of more than 50% of an interest in Signature to another entity; or
  (v) December 31, 1999.

  In 1997, Wards had facilities available under vendor financing programs (which
  are reflected in liabilities subject to compromise) which totaled $725. At
  June 28, 1997, these facilities were principally drawn. These facilities are
  no longer available due to the Chapter 11 filing.

  The Company intends to improve its financial condition and reduce its
  dependence on borrowing by increasing its sales base, continuing to improve
  its gross margin rates and controlling expenses. In addition, the financial
  performance of the remaining retail stores will be reviewed on a continuing
  basis and additional stores may be closed if warranted. Management has also
  reevaluated the Company's merchandising, marketing, store operations and
  logistics strategies, and is in the early stages of implementing the new
  strategy.

  Future cash is expected to continue to be provided by ongoing operations,
  receipt of payment for credit sales under the agreements with Montgomery Ward
  Credit Companies and borrowings under the DIP Facility.

  The Company began addressing Year 2000 date conversion issues in the fall of
  1996 and has developed a plan to assess and remediate both information
  technology ("IT") and non-IT systems. The Company's plan consists of two
  phases. The assessment phase includes the inventory of all systems (IT and 
  non-IT) subject to the Year 2000 issue and developing a plan for addressing
  the problem as related to each system. The remediation phase includes the
  implementation of the identified changes required and testing of these changes
  before implementation.

  For IT systems, the Company has completed its assessment phase and the
  remediation phase is 60% complete. The Company expects that a substantial
  portion of the remediation effort will be completed by December 31, 1998 and
  the remainder is expected to be completed in the first half of 1999. For non-
  IT systems, the Company anticipates the assessment phase to be completed in
  early 1999 and the remediation phase to be completed by September 30, 1999.
  The Company is also in the process of assessing the Year 2000 readiness of its
  suppliers and service providers and is participating in a National Retail
  Federation survey of such providers.

                                       17
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

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

Discussion of Financial Condition (continued)

  For the first nine months of 1998, the Company had expensed $19 related to
  Year 2000 readiness. Prior to 1998, the Company expensed $14. The Company
  estimates an additional $13 will be expensed as incurred to become Year 2000
  ready. In addition, the Year 2000 issue has accelerated the timing of an
  estimated $19 of capital expenditures of which $12 has been capitalized
  through the third quarter of 1998. No significant capital projects have been
  delayed as a result of addressing the Year 2000 issue. Based on the Company's
  plan, the remaining costs to be expended to become Year 2000 ready are not
  expected to materially impact future cash flows.

  The Company believes that its program will result in Year 2000 readiness.
  However, due to the complexity of the issue, there can be no assurances given
  that the Company's plan will be fully effective. The Company could experience
  interruptions of business at some of its operations, including those caused
  by, but not limited to, the inability of utility companies to provide
  telecommunications and electrical services, the failure of financial
  institutions to process transactions, and the inability of vendors to deliver
  products on a timely basis. The Company is in the process of developing
  contingency plans which are anticipated to be completed by September 30, 1999,
  with respect to the Company's facilities and merchandise supply and
  distribution networks.

  As discussed in Note 2 to the Consolidated Financial Statements, the
  accompanying financial statements have been prepared on a going concern basis.
  The appropriateness of using the going concern basis is dependent upon, among
  other things, confirmation of a plan of reorganization, future profitable
  operations, the ability to comply with the terms of the DIP Facility and the
  ability to generate sufficient cash from operations and financing arrangements
  to meet obligations.

                                       18
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

Part II - Other Information

Item 1.   Legal Proceedings

          None.

Item 2.   Changes in Securities

          None.

Item 3.   Defaults Upon Senior Securities

  The Company's Certificate of Incorporation provides that the holders of shares
  of Senior Preferred Stock of the Company are entitled to receive, before any
  dividends may be declared or paid upon or set aside for the Common Stock, cash
  dividends in quarterly payments on the last business day of March, June,
  September and December. The Company did not make any dividend payment with
  respect to the Senior Preferred Stock on June 30, 1997. The holder of all
  1,750 outstanding shares of the Senior Preferred Stock would have been
  entitled to receive $3,066,875 in such dividend on such date. Such amount also
  represents the total arrearage on the payment of dividends on the Senior
  Preferred Stock as of the date of filing of this report.
 
  The redemption provisions of the Senior Preferred Stock have been stayed by
  the Chapter 11 proceedings. No further dividends will be declared or paid
  prior to the approval of a plan of reorganization.

  The Company's Certificate of Incorporation provides that the holders of shares
  of Series C Preferred Stock of the Company are entitled to receive, before any
  dividends may be declared or paid upon or set aside for the Common Stock, cash
  dividends in quarterly payments on the last business day of March, June,
  September and December. If for any reason the full dividend on any payment
  date is not paid in cash on such date, the unpaid amount thereof will be
  automatically, without further action, be deemed added to the Liquidation
  Value. The Company did not make any dividend payment with respect to the
  Series C Preferred Stock on June 30, 1997. The holder of all 352 shares would
  have been entitled to receive $1,726,154 in such dividend on such date. This
  amount was added to the Liquidation Value.

  The redemption provisions of the Series C Preferred Stock have been stayed by
  the Chapter 11 proceedings. No further dividends will be declared or paid
  prior to the approval of a plan of reorganization.

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

          None.

Item 5.   Other Information

          None.

                                       19
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

Item 6.   Exhibits and reports on Form 8-K

     (a)  Exhibits
 
          10.(i)(G)(6)  Waiver to Post-Petition Loan and Guaranty Agreement
                        among Montgomery Ward & Co., Incorporated, as borrower;
                        Montgomery Ward Holding Corp. and other debtor
                        subsidiaries of Montgomery Ward Holding Corp., as
                        guarantors; General Electric Capital Corporation, as
                        agent and lender; and various lenders as of June 26,
                        1998.

          10.(i)(G)(7)  Waiver to Post-Petition Loan and Guaranty Agreement
                        among Montgomery Ward & Co., Incorporated, as borrower;
                        Montgomery Ward Holding Corp. and other debtor
                        subsidiaries of Montgomery Ward Holding Corp., as
                        guarantors; General Electric Capital Corporation, as
                        agent and lender; and various lenders as of September 2,
                        1998.

          10.(i)(L)(7)  Waiver, Amendment and Extension Agreement dated as of
                        July 31, 1998, among Signature Financial/Marketing,
                        Inc., various lenders, The Bank of New York, as
                        Documentation Agent, and The Bank of Nova Scotia, as
                        Administrative Agent.
 
          10.(i)(Q)     Promissory Note among Lechmere, Inc. and Signature
                        Financial/Marketing, Inc. dated September 30, 1998.

          27.           Financial Data Schedule.

     (b)  Reports on Form 8-K

          None.


                                   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                   /s/ Thomas J. Paup
                    -----------------------------------------------------------
NAME AND TITLE      Thomas J. Paup, Executive Vice President and 
                    Chief Financial Officer

DATE:               November 13, 1998

                                       20
<PAGE>
 
                                 Exhibit Index
                                 -------------



     10. (i) (G) (6) Waiver to Post-Petition Loan and Guaranty Agreement among
                     Montgomery Ward & Co., Incorporated, as borrower;
                     Montgomery Ward Holding Corp. and other debtor subsidiaries
                     of Montgomery Ward Holding Corp., as guarantors; General
                     Electric Capital Corporation, as agent and lender; and
                     various lenders as of June 26, 1998.

     10. (i) (G) (7) Waiver to Post-Petition Loan and Guaranty Agreement among
                     Montgomery Ward & Co., Incorporated, as borrower;
                     Montgomery Ward Holding Corp. and other debtor subsidiaries
                     of Montgomery Ward Holding Corp., as guarantors; General
                     Electric Capital Corporation, as agent and lender; and
                     various lenders as of September 2, 1998.

     10. (i) (L) (7) Waiver, Amendment and Extension Agreement dated as of July
                     31, 1998, among Signature Financial/Marketing, Inc.,
                     various lenders, The Bank of New York, as Documentation
                     Agent, and The Bank of Nova Scotia, as Administrative
                     Agent.

     10. (i) (Q)     Promissory Note among Lechmere, Inc. and Signature
                     Financial/Marketing, Inc. dated September 30, 1998.

     27.             Financial Data Schedule.