<PAGE>

                                                                     PRELIMINARY
 ===============================================================================

                                 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 SEPTEMBER 27, 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 November 10, 1997 the Registrant had 18,322,247 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 September 27, 1997
                                        
                     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 
           Condition and Results of Operations.                       13
 
 
Part II -  Other Information.                                         18
</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
                                                                       -----------------------      -----------------------
                                                                       Sept. 27,     Sept. 28,      Sept. 27,     Sept. 28,
(In millions, except per share amounts)                                  1997          1996           1997          1996
                                                                       ---------     ---------      ---------     ---------
<S>                                                                    <C>           <C>            <C>           <C>
Revenues                                                                                                             
  Net sales, including leased and licensed department sales            $    947      $  1,376       $  3,217      $  3,984
  Direct response marketing revenues, including insurance                   214           191            638           553
                                                                       ---------     ---------      ---------     ---------
    Total revenues                                                        1,161         1,567          3,855         4,537
                                                                       ---------     ---------      ---------     ---------

Costs and expenses                                                                                                   
  Cost of goods sold, including net occupancy and                                                      
    buying expense (Note 10)                                                805         1,105          2,872         3,224
  Operating, selling, general and administrative expenses, including                                                 
    benefits and losses of direct response operations (Note 6)              533           482          1,645         1,330
  Interest expense                                                           17            28            103            75
                                                                       ---------     ---------      ---------     ---------
    Total costs and expenses                                              1,355         1,615          4,620         4,629
                                                                       ---------     ---------      ---------     ---------

Loss before reorganization costs and income taxes                          (194)          (48)          (765)          (92)
Reorganization costs (Note 4)                                               582             -            582             -
                                                                       ---------     ---------      ---------     ---------
Loss before income taxes                                                   (776)          (48)        (1,347)          (92)
Income tax benefit                                                         (161)          (19)          (375)          (37)
                                                                       ---------     ---------      ---------     ---------

Net loss                                                                   (615)          (29)          (972)          (55)
Preferred stock dividend requirements (Note 7)                                -             3              8             9
                                                                       ---------     ---------      ---------     ---------

Net loss applicable to common shareholders                             $   (615)     $    (32)      $   (980)     $    (64)
                                                                       =========     =========      =========     =========

Net loss per common share (Note 5)                                                                                   
Class A                                                                $ (17.17)     $   (.80)      $ (27.37)     $  (1.58)
Class B                                                                  (11.99)         (.70)        (19.12)        (1.38)
</TABLE>

                See notes to consolidated financial statements.

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


<TABLE>
<CAPTION>
                                                                           September 27,         December 28,
                                                                               1997                  1996
                                                                           -------------         ------------ 
(In millions)                                                               (Unaudited)
<S>                                                                        <C>                   <C>      
Assets
    Cash and cash equivalents                                                     $  238               $   32
    Short-term investments                                                             1                    3
    Investments of insurance operations                                              306                  317
                                                                           -------------         ------------
      Total cash and investments                                                     545                  352
 
    Trade and other accounts receivable                                              262                  213
    Accounts and notes receivable from affiliates                                     16                   13
                                                                           -------------         ------------
      Total Receivables                                                              278                  226
 
    Merchandise inventories                                                        1,147                1,545
    Prepaid pension cost                                                             365                  351
    Properties, plant and equipment, net of accumulated
     depreciation and amortization                                                 1,199                1,308
    Direct response and insurance acquisition costs                                  575                  603
    Other assets                                                                     368                  494
    Deferred income taxes                                                            320                    -
                                                                           -------------         ------------
      Total Assets                                                                $4,797               $4,879
                                                                           =============         ============
 
Liabilities
    Short-term debt                                                               $  102               $1,028
    Trade accounts payable                                                           463                1,585
    Federal income taxes payable                                                       -                    4
    Accrued liabilities and other obligations                                        760                1,228
    Insurance policy claim reserves                                                  237                  227
    Long-term debt                                                                    73                   87
    Obligations under capital leases                                                   -                   60
    Deferred income taxes                                                              -                   52
    Liabilities subject to compromise (Note 3)                                     3,499                    -
                                                                           -------------         ------------ 
      Total Liabilities                                                            5,134                4,271
 
Commitments and Contingent Liabilities (Note 8)
 
Redeemable Preferred Stock (Note 7)                                                  212                  175
 
Shareholders' Equity (deficit)
    Common stock                                                                       1                    1
    Capital in excess of par value                                                    53                   53
    Retained earnings (deficit)                                                     (471)                 509
    Unrealized gain on marketable equity securities                                    7                    9
    Less:  treasury stock, at cost                                                  (139)                (139)
                                                                           -------------         ------------  
      Total shareholders' equity (deficit)                                          (549)                 433
                                                                           -------------         ------------                       
      Total Liabilities and Shareholders' Equity                                  $4,797               $4,879
                                                                           =============         ============  
</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
                                                                       ----------------------------------------
                                                                          September 27,         September 28,
(In millions)                                                                  1997                  1996
                                                                       ------------------    ------------------
<S>                                                                    <C>                   <C> 
Cash flows from operating activities:
Net loss                                                                            $(972)                $ (55)
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 Electric Avenue & More                              104                     -
      stores
  Depreciation and goodwill amortization                                               96                   100
  Amortization of direct response and insurance
    acquisition costs                                                                 184                   147
  Deferred income taxes                                                              (375)                   (5)
  Provision for loss on sale of interest in ValueVision
    International, Inc. common stock                                                   23                     -
  Gain on sale of assets                                                                -                    (3)
Changes in operating assets and liabilities:
  Trade and other accounts receivable                                                 (49)                  (52)
  Accounts and notes receivable from affiliates                                        (3)                  (10)
  Merchandise inventories                                                             254                   (20)
  Prepaid pension cost                                                                (13)                   (3)
  Federal income taxes payable                                                          -                   (37)
  Direct response and insurance acquisition costs                                    (156)                 (208)
  Other assets                                                                          6                   (21)
  Trade accounts payable                                                              219                  (300)
  Federal income taxes payable, net                                                     -                    (6)
  Accrued liabilities and other obligations                                           (33)                 (120)
  Insurance policy claim reserves                                                      10                     1
                                                                       ------------------    ------------------        
  Net cash used for operating activities                                             (165)                 (592)
                                                                       ------------------    ------------------
 
Cash flows used for investing activities:
  Purchase of short-term investments                                                 (311)                  (19)
  Sale of short-term investments                                                      313                    31
  Purchase of investments of insurance operations                                    (517)                 (495)
  Sale of investments of insurance operations                                         528                   521
  Capital expenditures                                                                (42)                  (55)
  Disposition of properties, plants and equipment, net                                  5                    12
  Investment in Merchant Partners                                                       -                    (7)
  Acquisition of Amoco Enterprises                                                      -                  (100)
                                                                       ------------------    ------------------
    Net cash used for investing activities                                          $ (24)                $(112)
                                                                       ------------------    ------------------
</TABLE>

                                       5
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                       For the 39-Week
                                                                        Periods Ended
                                                                ------------------------------
                                                                September 27,    September 28,
(In millions)                                                        1997            1996
                                                                -------------    -------------
<S>                                                             <C>              <C>
Cash flows from financing activities:
    Proceeds from short-term borrowings, net                        $409             $635
    Payments of long-term debt                                        (5)              (6)
    Payments of obligations under capital leases                      (5)              (5)
    Cash dividends paid                                               (4)              (6)
    Proceeds from issuance of long-term debt                           -              102
    Proceeds from issuance of common stock                             -                3
    Purchase of treasury stock, at cost                                -              (14)
                                                                    ----             ----
      Net cash provided by financing activities                      395              709
                                                                    ----             ----

Increase in cash and cash equivalents                                206                5
Cash and cash equivalents at beginning of period                      32               37
                                                                    ----             ----
Cash and cash equivalents at end of period                          $238             $ 42
                                                                    ====             ====

Supplemental disclosure of cash flow information:
    Cash paid during the period for:
      Income taxes                                                  $  -             $  2
      Interest                                                        69               81

Non-cash investing activity:
    Change in unrealized gain on marketable equity securities        $(2)             $(4)

Non-cash financing activities:
    Notes issued for purchase of treasury stock                     $  -             $  6
    Preferred stock issued as financing fee                           35                -
    Increase in liquidation value of preferred stock                   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 1996 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 1996 Annual
    Report on Form 10-K. Certain prior period amounts have been reclassified to
    be comparable with the current period presentation.
 
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"), which are engaged in direct response marketing (including
    insurance); Marinco Insurance U.S.A., Inc. ("Marinco"); and Montgomery Ward
    Foundation.

    After a long period of negotiation, MW Holding's subsidiary, Montgomery Ward
    & Co., Incorporated ("Montgomery Ward"), was unable to reach an out-of-court
    settlement with its lenders. Accordingly, bankruptcy petitions were filed in
    order to obtain an opportunity to reorganize and begin implementing the
    Company's strategies while working to restructure its indebtedness. Pursuant
    to the Post-Petition Loan and Guaranty Agreement dated July 8, 1997, among
    Montgomery Ward and Lechmere, Inc. ("Lechmere"), as borrowers; MW Holding
    and other debtor subsidiaries of MW Holding, as guarantors; General Electric
    Capital Corporation ("GE Capital"), as agent and lender; and various
    lenders, as amended (the "DIP Facility"), the lenders have agreed to provide
    up to $1 billion in post-petition financing to Montgomery Ward.

    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.

    Under the Bankruptcy Code, actions to collect pre-petition indebtedness are
    stayed and other contractual obligations may not be enforced against the
    Company. In addition, the Company may reject executory contracts and lease
    obligations. Parties affected by these rejections may file claims with the
    Bankruptcy Court in accordance with the reorganization process. If the
    Company is able to successfully reorganize, substantially all unsecured
    liabilities as of the petition date would be subject to settlement under a
    plan of reorganization to be voted upon by all impaired classes of creditors
    and equity security holders and approved by the Bankruptcy Court.

                                       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 significant 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.  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>

        (In millions)                       September 27,
                                                1997
                                            -------------
        <S>                                 <C>
        Short-term debt                        $1,335
        Long-term debt                              9
        Obligations under capital leases           55
        Accounts payable                        1,341
        Postretirement benefit accruals           145
        Lease rejection claims                     90
        Other liabilities                         524
                                               ------
                                               $3,499
                                               ======
</TABLE>

    The Company has $83 million of liabilities due Signature and Marinco which
    have been eliminated in consolidation but are subject to compromise.

    All of the Company's short-term debt is in default of the terms of the
    applicable loan agreements, with the exception of the credit agreement
    between Signature and various lenders. Subject to the entry of an order by
    the Bankruptcy Court, the Company has obtained a waiver of the defaults
    under the Signature Credit Agreement and an extension of the maturity date
    to January 31, 1998.

                                       8
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

3.  Liabilities Subject to Compromise (continued)

    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.
    Contractual interest expense not recorded on certain pre-petition debt
    totaled $26 million for the 13-week and 39-week periods ended September 27,
    1997.

4.  Reorganization Costs

    Reorganization costs recorded in the third quarter of fiscal 1997 consisted
    of the following (in millions):

<TABLE>
<S>                                                   <C>
        Loss on disposition of assets of Lechmere     $280
        Montgomery Ward and Electric Avenue &
          More store closings                          260
        Other                                           36
        Professional fees                                8
        Interest income                                 (2)
                                                      ----
                                                      $582
                                                      ====
</TABLE>

    On August 14, 1997, the Bankruptcy Court approved a motion filed by
    Montgomery Ward to exit its non-core specialty retail store businesses -
    Lechmere, Home Image by Lechmere and Electric Avenue & More. The exit
    involved the closing of 44 stores. The closings are expected to generate
    positive cash flows and reduce future operating losses. The Company recorded
    a pre-tax charge of $280 million associated with the closing of Lechmere and
    $55 million associated with the exit of Electric Avenue & More, which
    included losses and costs associated with liquidation of assets, rejection
    of leases, severance payments and other.

    On October 17, 1997, Montgomery Ward filed a motion with the Bankruptcy
    Court to close 48 underperforming stores. The closings are expected to
    generate positive cash flows and reduce future operating losses. The Company
    recorded a pre-tax charge of $205 million associated with the closing of
    these stores, which includes losses and costs associated with the
    liquidation of assets, lease rejection claims, severance payments and other.
    On November 7, 1997, the Bankruptcy Court approved the closing of these
    stores.

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


5.  Net Loss Per Common Share

    Net loss per common share is computed as follows:

<TABLE>
<CAPTION>
                                                For the 13-Week             For the 13-Week
                                                 Periods Ended               Periods Ended
(In millions, except share and per             September 27, 1997          September 28, 1996
  share amounts)                             Class A       Class B       Class A       Class B
                                            ----------    ----------    ----------    ----------
<S>                                         <C>           <C>           <C>           <C>
Net loss applicable to common
   shareholders                             $     (315)   $     (300)   $      (15)   $      (17)

Weighted average number of common
   shares outstanding                       18,322,247    25,000,000    19,230,539    25,000,000

Net loss per share                          $   (17.17)   $   (11.99)   $     (.80)   $     (.70)


                                                For the 39-Week             For the 39-Week
                                                 Periods Ended               Periods Ended
(In millions, except share and per             September 27, 1997          September 28, 1996
  share amounts)                             Class A       Class B       Class A       Class B
                                            ----------    ----------    ----------    ----------
Net loss applicable to common
   shareholders                             $     (502)   $     (478)   $     (30)    $      (34)
Weighted average number of common
   shares outstanding                       18,322,247    25,000,000    19,269,681    25,000,000

Net loss per share                          $   (27.37)   $   (19.12)   $    (1.58)   $    (1.38)

</TABLE>
                                                                               
    At its annual meeting on May 29, 1997, the stockholders of the Company
    authorized an additional 10,000,000 shares of Class A Common Stock, Series
    3, $.01 par value. None of the additional shares have been issued.

    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.  Insurance, Benefits and Losses

    Operating, selling, general and administrative expenses include benefits and
    losses related to direct response marketing operations of $38 million and
    $41 million for the 13-week periods ended September 27, 1997 and September
    28, 1996, respectively, and $109 million and $115 million for the 39-week
    periods then ended, respectively.

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


7.  Preferred Stock

    On March 4, 1997, GE Capital, Montgomery Ward and Lechmere amended the
    Program Agreement under which GE Capital provides funds to Montgomery Ward
    and Lechmere to pay manufacturers and distributors of goods purchased by
    Montgomery Ward and Lechmere. In exchange for a $150 million increase in the
    maximum amount of funds GE Capital agreed to provide, MW Holding agreed to
    issue shares of a new series of Preferred Stock having a liquidation value
    of $21 million. On April 1, 1997, GE Capital further increased its funding
    under the Program Agreement by $100 million and the Board of Directors of MW
    Holding agreed to issue additional shares of the new series of Preferred
    Stock.

    At its Annual Meeting held on May 29, 1997, the stockholders of MW Holding
    approved an amendment to its Certificate of Incorporation authorizing the
    issuance of up to 25,000 shares of preferred stock. The amendment allows
    future issuances of preferred stock by action of the Board of Directors
    without the need for further action by the stockholders. The Board of
    Directors designated 1,000 shares of the newly authorized preferred stock to
    be Series C Preferred Stock, and MW Holding issued 352 shares of the Series
    C Preferred Stock to GE Capital in full payment of the obligations described
    above.

    All of the Series C Preferred Stock is redeemable on September 30, 2002 at a
    redemption price of $100,000 per share (the "Liquidation Value") plus unpaid
    accrued dividends. Dividends are payable quarterly at a rate per annum equal
    to 15%, with the first payment based on the number of days from and
    including March 4, 1997. If for any reason the full dividend on any payment
    date is not paid in cash on such date, the unpaid amount thereof will
    automatically, without further action, be deemed added to the Liquidation
    Value. MW Holding did not pay the dividend due June 30, 1997.

    MW Holding also did not pay dividends due on June 30, 1997, on its Senior
    Preferred Stock. The redemption provisions of the Series C and Senior
    Preferred Stock have been stayed by the Chapter 11 proceedings. No further
    dividends will be declared or paid on the Series C or Senior Preferred Stock
    prior to the approval of a plan of reorganization.

8.  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. As discussed in Note
    2, the claims and litigation relating to pre-petition periods have been
    stayed as a result of the Chapter 11 filing.

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


8.  Commitments and Contingent Liabilities (continued)

    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, and Montgomery Ward Credit Corporation
    ("MWCC") and Monogram Credit Card Bank of Georgia ("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 in violation of the bankruptcy laws
    dealing with reaffirmations ultimately reduced Montgomery Ward's and
    Lechmere's loss sharing obligations. 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 material financial obligations related to the acts alleged in the
    complaint. All material actions pending against the Company, Montgomery Ward
    and Lechmere in the litigation, have been stayed.

9.  Customer Credit Agreements

    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" and, collectively with the Card
    Agreement, the "Agreements") effective April 1, 1996 with MWCC 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 billion
    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 billion 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.
    The Bankruptcy Court has approved the interim assumption of the Agreements.
    A hearing has been set for November 24, 1997, regarding a motion filed by
    Monogram and MWCC regarding its proposed terms for the assumption of the
    Agreements. The performance of the respective obligations of MWCC and
    Monogram under the Agreements has been guaranteed by GE Capital.

10. 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. This change reduced cost of goods sold by $10
    million and $28 million for the 13-week and 39-week periods ended September
    28, 1996 and reduced the net loss by $6 million and $17 million for the 13-
    week and 39-week periods ended September 28, 1996.

                                       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 1997 to the third quarter of 1996, as
    well as the first nine months of 1997 to the first nine months 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 quarter and the first nine 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: 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 1997 Compared with Third Quarter 1996

    Due to Montgomery Ward's inability to reach an out-of-court settlement with
    its lenders, petitions for reorganization under Chapter 11 of the Bankruptcy
    Code were filed at the close of business on July 7, 1997. The Company's
    performance reflected difficult competitive conditions and financial
    pressures resulting in a third quarter 1997 loss before reorganization costs
    and income taxes of $194 as compared to third quarter 1996 pretax loss of
    $48 million, as restated (see Note 10). 1997 reorganization costs were $582
    (see Note 4).

    Consolidated total revenues (net sales and direct response marketing
    revenues, including insurance) were $1,161, compared with $1,567 in the
    third quarter 1996, decreasing by $406, or 26%. Net sales decreased $429, or
    31%. Lechmere and Electric Avenue & More sales declined $154 million from
    the third quarter 1996 due primarily to the closing of those stores
    effective August 1997 (see Note 4). 1997 sales results also reflect the
    Company's decision to exit its personal computer product offerings. 1996
    sales for this category were $53. In addition, the Company's management
    believes that merchandise shipment interruptions as a result of the
    bankruptcy filing and the decline in percentage-off offers to the Montgomery
    Ward credit cardholders (3 in 1997 versus 8 in 1996) resulted in a portion
    of the sales decline. All Montgomery Ward store product categories also
    experienced sales decreases ranging from 11% to 32%. The $23, or 12%
    increase in direct response marketing revenues was primarily due to
    increased clubs' memberships.

                                       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 1997 Compared with Third Quarter 1996 (continued)

    Gross margin (net sales less cost of goods sold) dollars were $142, a
    decrease of $129, or 48%, from the third quarter 1996. This decrease was due
    to the gross margin impact of the decreased sales of $97, and a decrease in
    the margin rate on sales of $38, offset by decreased occupancy and other
    margin-related expenses of $6. Third quarter margin rates were unfavorably
    impacted by the Chapter 11 filing. As certain of the Company's vendors
    halted shipments for portions of the third quarter, a higher mix of third
    quarter sales represented sales of clearance versus regular price
    merchandise.

    Operating, selling, general and administrative expenses increased $51, or
    11%, from the third quarter 1996. The increase is primarily due to increased
    bad debt expense of $44; increased amortization and other direct marketing-
    related expenses of Signature of $24; and decreased product service income
    of $18; offset by lower Lechmere expenses of $32 and all other decreases of
    $3.

    Net interest expense decreased $11, or 39%, from the prior year. The Company
    has stopped accruing interest on its short-term debt in connection with the
    Chapter 11 filing.

    The income tax benefit was $161 for the third quarter of 1997 as compared to
    a benefit of $19 for the third quarter of 1996. The 1997 income tax benefit
    reflects an increase in the Company's net operating loss (NOL) carryforward
    of $271, offset by a valuation allowance of $110. Management believes that
    the NOL carryforward will be realized through the sales of appreciated
    assets; however, a valuation reserve has been recognized because it is
    more likely than not that some portion will not be realized.

First Nine Months of 1997 Compared with Nine Months of 1996

    As discussed under "Third Quarter 1997 Compared With Third Quarter 1996",
    the Company's performance during the first nine months of 1997 reflected
    difficult competitive and financial conditions. The Company reported a loss
    before reorganization costs and income taxes of $765 for the third quarter
    1997 year-to-date period as compared to a pre-tax loss of $92, as restated
    (see Note 10) for the comparable 1996 period. 1997 reorganization costs were
    $582 (see Note 4).

    Consolidated total revenues were $3,855, compared with $4,537 for the third
    quarter 1996 year-to-date period, decreasing by $682, or 15%. Net sales
    decreased $767, or 19%. All product categories experienced sales decreases,
    ranging from 9% to 22%. The sales decreases reflect the closing of the
    Lechmere and Electric Avenue & More stores, as well as the Company's
    decision to exit its personal computer product offerings. Direct response
    marketing revenues increased $85, or 15%, due to increased clubs'
    memberships.

    Gross margin dollars were $345, a decrease of $415, or 55%. The decrease was
    due to the gross margin impact of the sales decrease of $161, the decrease
    in the margin rate on sales of $249, and increased buying and other expenses
    of $5. The margin rate for the 1997 year-to-date period has been
    significantly impacted by sales of discontinued merchandise during the first
    six months, as well as the unfavorable impact of the Chapter 11 filing as
    discussed under "Third Quarter 1997 Compared with Third Quarter 1996."

    Operating, selling and general and administrative expenses increased $315,
    or 24%, from the third quarter year-to-date period of 1996. The increase was
    due to increased amortization and other direct-marketing related costs of
    Signature of $91; increased bad debt expense of $45; write-downs of
    investments and other unrealizable assets of $45; decreased product service
    income of $43; increased severance and payroll related costs of $33;
    increased promotional expenses of $17; and all other increased expenses of
    $41.

                                       14
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

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

Results of Operations (continued)

First Nine Months of 1997 Compared with Nine Months of 1996 (continued)

    Net interest expense increased $28, or 37%, from the prior year. The
    increase is due to increased borrowings (including borrowings under vendor
    financing programs) and an increase in the weighted average borrowing rate
    for the first two quarters of 1997. The second quarter year-to-date increase
    was partially offset by the third quarter decrease as discussed in "Third
    Quarter 1997 Compared to Third Quarter 1996."

    The income tax benefit was $375 as compared to a benefit of $37 for 1996.
    See "Third Quarter 1997 Compared with Third Quarter 1996" for a discussion
    of management's determination of the benefit recorded and the related
    valuation allowance provided during the third quarter of 1997.

Discussion of Financial Condition

    As discussed in Note 2 to the Consolidated Financial Statements, due to the
    inability of Montgomery Ward 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 $165 compared to
    $592 for the third quarter year-to-date period of 1996, a decrease of $427.
    The lower cash usage is summarized as follows:

<TABLE>
<S>                                                    <C>
        Cash impact of larger operating loss           $(672)
        Net cash received from facility closings         104
        Lower cash required for inventory and
          accounts payable                               793
        Lower expenditures for direct response and
          insurance acquisition costs                     52
        All other cash from operations                   150
                                                       -----
                                                       $ 427
                                                       =====
</TABLE>

    As shown above, cash required for inventory was significantly reduced in
    1997. This was primarily due to an inventory reduction program and better
    receipts management. Cash required for accounts payable was also reduced
    significantly, primarily as a result of the Chapter 11 filing.

    Net cash used in the Company's investing activities totaled $24 in the third
    quarter 1997, compared to net cash used of $112 in the third quarter 1996.
    The net cash used in 1996 included Signature's acquisition of the Amoco
    Motor Club.

    Net cash provided by financing activities totaled $395 for the third quarter
    1997, compared to $709 for the third quarter 1996. The Company had borrowed
    to the full extent of its financing facilities by the end of the second
    quarter of 1997. Due to the favorable cash impact of the reduction in
    payments allowed by the Chapter 11 filing, no borrowings were required under
    the Company's post-petition financing facilities in the third quarter of
    1997.

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

                                       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)

    As previously discussed in Note 2, Montgomery Ward entered into the DIP
    Facility on July 8, 1997, 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. Total borrowings outstanding were $125 at October 25, 1997.

    Under the DIP Facility, Montgomery Ward 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.

    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. These agreements are more fully discussed in the Company's annual
    report on Form 10-K for the fiscal year ended December 28, 1996 and the
    Company's quarterly report on Form 10-Q for quarterly periods ended March
    29, 1997 and June 28, 1997.

    Subject to the entry of an order by the Bankruptcy Court, Signature has
    obtained a waiver of the defaults under the Signature Credit Agreement and
    an extension of the maturity date to January 31, 1998. It is the intention
    of the management of Signature to refinance the facility with a new lender
    group prior to its amended expiration date. The Signature Credit Agreement
    is more fully discussed in the Company's annual report on Form 10-K for the
    fiscal year ended December 28, 1996 and the Company's quarterly report on
    Form 10-Q for quarterly periods ended March 29, 1997 and June 28, 1997.

    In 1997, Montgomery Ward 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 slowing expansion, controlling expenses, closing
    certain unprofitable stores and completing its inventory reduction program.
    Management has reevaluated the Company's merchandising, marketing, store
    operations and real estate strategies, and is in the early stages toward
    implementing the new strategy. The implementation phase is expected to last
    between twelve and eighteen months.

    On August 14, 1997, the Bankruptcy Court approved a motion filed by
    Montgomery Ward to exit its non-core specialty retail store businesses -
    Lechmere, Home Image by Lechmere and Electric Avenue & More. The exit
    involves the closing of 44 stores. The closings are expected to generate
    positive cash flows and reduce future operating losses. The Company recorded
    a pre-tax charge of $335 associated with the exit of these businesses, which
    included losses and costs associated with liquidation of assets, rejection
    of leases, severance payments and other.

                                       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 October 17, 1997, Montgomery Ward filed a motion with the Bankruptcy
    Court to close 48 underperforming stores. The closings are expected to
    generate positive cash flows and reduce future operating losses. The Company
    recorded a pre-tax charge of $205 associated with the closing of these
    stores, which includes losses and costs associated with the liquidation of
    assets, lease rejection claims, severance payments and other. On November 7,
    1997, the Bankruptcy Court approved the closing of these stores.

    Future cash is also expected to continue to be provided by ongoing
    operations, receipt of payment for credit sales under the agreements with
    Montgomery Ward Credit Companies, liquidation of merchandise and other
    assets of the non-core retail specialty businesses and borrowings under the
    DIP Facility.

    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.

                                       17
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

Part II - Other Information.

Item 1.   Legal Proceedings.

    At the close of business on July 7, 1997, Montgomery Ward Holding Corp. 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, which
    are engaged in direct response marketing (including insurance); Marinco
    Insurance U.S.A., Inc.; and Montgomery Ward Foundation.

    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. The claims and
    litigations have been stayed as a result of the Chapter 11 filing.

    On April 29, 1997, MW Holding, 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 MW Holding, 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
    bankruptcy reaffirmations.

    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 material financial obligations related to
    the acts alleged in the complaint. All material actions pending against the
    Company, Montgomery Ward and Lechmere in the litigation, have been stayed.

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.

                                      18
<PAGE>
 
                          MONTGOMERY WARD HOLDING CORP.
                                        

Part II - Other Information (continued)

Item 3.  Defaults Upon Senior Securities (continued)

    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.

Item 6.  Exhibits and reports on Form 8-K.
 
     (a) Exhibits.
 
       10.(i)(G)(2)      Waiver to Post-Petition Loan and Guaranty Agreement
                         among Montgomery Ward & Co., 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 dated as of August 12, 1997.
                         
       10.(i)(G)(3)      Waiver to Post-Petition Loan and Guaranty Agreement
                         among Montgomery Ward & Co., 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 dated as of September 24, 1997.
 
       10.(i)(N)         Asset Purchase, License & Agency Agreement for the
                         Purchase of Certain Assets of Lechmere, Inc. & Co., and
                         Montgomery Ward Incorporated, by Schottenstein
                         Bernstein Capital Group LLC dated August 14, 1997.
 
       10.(i)(O)         Agency Agreement between Schottenstein Bernstein
                         Capital Group LLC and Montgomery Ward & Co.,
                         Incorporated, as of August 14, 1997.

       27.               Financial Data Schedule.

                                      19
<PAGE>
 
                          MONTGOMERY WARD HOLDING CORP.
                                        

Part II - Other Information (continued)

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

    (b)   Reports on Form 8-K.

          On July 22, 1997, the Company filed a Form 8-K with respect to the
          filing of a petition for reorganization under Chapter 11 of the
          Bankruptcy Code in the United States Bankruptcy Court for the District
          of Delaware, commencing a proceeding captioned "In re Montgomery Ward
          Holding Corp., a Delaware Corporation, et. al.", Case No. 97-1409
          (PJW).

                                       20
<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                           /s/ Thomas J. Paup
                             ----------------------------------------
NAME AND TITLE               Thomas J. Paup, Executive Vice President
                               and Chief Financial Officer
 
DATE:                        November 17, 1997


                                       21