<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 JULY 4, 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 August 18, 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 July 4, 1998
                                        
                     Index to Quarterly Report on Form 10-Q



                                                                       Page
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.                                            19

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

<TABLE>
<CAPTION>
                                                               For the 13-week             For the 26-week
                                                                Periods Ended               Periods Ended
                                                            ---------------------       ---------------------
                                                            July 4,      June 28,       July 4,      June 28,
(In millions, except per share amounts)                       1998         1997          1998          1997
                                                            -------      --------       -------      --------
<S>                                                          <C>           <C>           <C>          <C>
Revenues
    Net sales, including leased and licensed department
     sales                                                   $  841        $1,151        $1,613       $ 2,270
    Direct response marketing revenues, including
     insurance                                                  214           214           433           424
                                                             ------        ------        ------       ------- 
      Total Revenues                                          1,055         1,365         2,046         2,694
                                                             ------        ------        ------       -------
Costs and expenses
    Cost of goods sold, including net occupancy and
      buying expense                                            678         1,070         1,303         2,067
    Operating, selling, general and administrative
     expenses, including benefits and losses of 
     direct response operations (Note 5)                        438           594           885         1,112
    Interest expense                                             15            46            28            86
                                                             ------        ------        ------       -------
      Total Costs and Expenses                                1,131         1,710         2,216         3,265
                                                             ------        ------        ------       -------
Loss before Reorganization Costs and Income Taxes               (76)         (345)         (170)         (571)
Reorganization Costs (Note 6)                                    58             -            74             -
                                                             ------        ------        ------       -------
Loss before Income Taxes                                       (134)         (345)         (244)         (571)
Income Tax Benefit                                                -          (129)            -          (214)
                                                             ------        ------        ------       -------
Net Loss                                                       (134)         (216)         (244)         (357)
Preferred Stock Dividend Requirements                             -             5             -             8
                                                             ------        ------        ------       -------
Net Loss Applicable to Common Shareholders                   $ (134)       $ (221)       $ (244)      $  (365)
                                                             ======        ======        ======       =======
Net Loss per Common Share (Note 7)
 Class A                                                     $(3.68)       $(6.10)       $(6.67)      $(10.08)
 Class B                                                      (2.70)        (4.36)        (4.89)        (7.21)
</TABLE>


                See notes to consolidated financial statements.

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


<TABLE>
<CAPTION>
                                                                                         July 4,                      January 3,
(In millions)                                                                              1998                          1998
                                                                                        ----------                    ---------
                                                                                        (Unaudited)
<S>                                                                                       <C>                           <C>
Assets
    Cash and cash equivalents                                                             $  178                        $  189
    Short-term investments                                                                     1                             1
    Investments of insurance operations                                                      370                           358
                                                                                          ------                        ------
      Total cash and investments                                                             549                           548

    Trade and other accounts receivable                                                      277                           234
    Accounts and notes receivable from affiliates                                             17                             6
                                                                                          ------                        ------
      Total Receivables                                                                      294                           240

    Merchandise inventories                                                                1,058                         1,120
    Prepaid pension cost                                                                     384                           366
    Properties, plant and equipment, net of accumulated depreciation
      and amortization                                                                     1,044                         1,088
    Direct response and insurance acquisition costs                                          528                           559
    Other assets                                                                             292                           352
    Deferred income taxes                                                                    301                           299
                                                                                          ------                        ------
      Total Assets                                                                        $4,450                        $4,572
                                                                                          ======                        ======

Liabilities
    Short-term debt  (Note 3)                                                             $  102                        $  102
    Trade accounts payable                                                                   360                           442
    Accrued liabilities and other obligations                                                722                           736
    Insurance policy claim reserves                                                          244                           241
    Long-term debt                                                                           371                           122
    Liabilities subject to compromise (Note 4)                                             3,433                         3,468
                                                                                          ------                        ------
      Total Liabilities                                                                    5,232                         5,111

Commitments and Contingent Liabilities (Note 8)

Redeemable Preferred Stock                                                                   177                           177

Shareholders' Deficit
    Common stock                                                                               1                             1
    Capital in excess of par value                                                            65                            64
    Retained deficit                                                                        (895)                         (651)
    Unrealized gain on marketable equity securities                                            9                             9
    Less:  Treasury stock, at cost                                                          (139)                         (139)
                                                                                          ------                        ------
      Total Shareholders' Deficit                                                           (959)                         (716)
                                                                                          ------                        ------
      Total Liabilities and Shareholders' Deficit                                         $4,450                        $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 26-Week
                                                                                             Periods Ended
                                                                            ------------------------------------------------
                                                                                 July 4,                       June 28,
(In millions)                                                                      1998                          1997
                                                                            ------------------            ------------------
Cash flows used for operating activities:
<S>                                                                         <C>                            <C>
Net loss                                                                                 $(244)                        $(357)
Adjustments to reconcile net loss to net cash used for operating
 activities:
    Net receipts of cash relating to disposition of assets of
     Lechmere, Inc. and closing of Wards and Electric Avenue & More stores                  45                             -
    Provision for reorganization costs                                                      42                             -
    Depreciation and goodwill amortization                                                  56                            69
    Amortization of direct response and insurance acquisition costs                        120                           123
    Deferred income taxes                                                                   (2)                         (210)
    Other                                                                                    1                             -
Changes in operating assets and liabilities:
    Trade and other accounts receivable                                                    (43)                           47
    Accounts and notes receivable from affiliates                                          (11)                           10
    Merchandise inventories                                                                 59                           269
    Prepaid pension cost                                                                   (18)                           (8)
    Direct response and insurance acquisition costs                                        (89)                         (109)
    Other assets                                                                            17                            17
    Trade accounts payable                                                                 (57)                          (73)
    Accrued liabilities and other obligations                                              (36)                         (147)
    Federal income taxes payable                                                             -                            (4)
    Insurance policy claim reserves                                                          3                             2
    Liabilities subject to compromise                                                      (39)                            -
                                                                            ------------------            ------------------
      Net cash used for operating activities                                              (196)                         (371)
                                                                            ------------------            ------------------
Cash flows provided by (used for) investing activities:
    Purchase of investments of insurance operations                                       (513)                         (289)
    Sale of investments of insurance operations                                            501                           325
    Purchase of short-term investments                                                       -                           (85)
    Sale of short-term investments                                                           -                            87
    Capital expenditures                                                                   (34)                          (35)
    Disposition of properties, plants and equipment, net                                     1                             3
                                                                            ------------------            ------------------
      Net cash provided by (used for) investing activities                               $ (45)                        $   6
                                                                            ------------------            ------------------
</TABLE>

                See notes to consolidated financial statements.

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


<TABLE>
<CAPTION>
                                                                                            For the 26-Week
                                                                                             Periods Ended
                                                                            ------------------------------------------------

                                                                                  July 4,                     June 28,
(In millions)                                                                       1998                        1997
                                                                            --------------------        --------------------
Cash flows provided by financing activities:
<S>                                                                           <C>                              <C>
    Borrowings under Post-Petition Loan and Guaranty Agreement, net                        $ 250                       $ -
    Restricted cash applied as payments under Long Term Credit
      Agreement                                                                              (14)                        -
    Proceeds from short-term borrowings, net                                                   -                         409
    Payments of long-term debt                                                                (1)                         (5)
    Payments of obligations under capital leases                                              (5)                         (3)
    Cash dividends paid                                                                        -                          (4)
                                                                            --------------------        --------------------
      Net cash provided by financing activities                                              230                         397
                                                                            --------------------        --------------------
Increase (decrease) in cash and cash equivalents                                             (11)                         32
Cash and cash equivalents at beginning of period                                             189                          32
                                                                            --------------------        --------------------
Cash and cash equivalents at end of period                                                 $ 178                       $  64
                                                                            ====================        ====================
Supplemental disclosure of cash flow information:
      Income taxes paid                                                                    $   2                       $   -
      Interest paid                                                                           20                          65

Non-cash investing activity:
    Change in unrealized gain on marketable equity securities                              $   -                       $  (5)
</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
    $135 million and $223 million for the quarterly periods ended July 4, 1998
    and June 28, 1997, respectively, and $244 million and $363 million for the
    26-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 September 15,
    1998. The Company expects to file a motion to further extend such exclusive
    right to file a plan of reorganization. Although management expects to file
    a plan of reorganization in late 1998 or 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

    Signature borrowed $102 under a Credit Agreement ("Signature Credit
    Agreement") dated as of September 27, 1996 as amended and restated October
    21, 1996 between Signature and various lenders, as further modified and
    amended. The proceeds were used to repay the intercompany loan from Wards to
    Signature arising from Signature's acquisition of the Amoco Motor Club. The
    loan matured on January 31, 1998 and has not been repaid. The lenders agreed
    to extend the maturity date of the loan under the Signature Credit Agreement
    to the earlier of July 31, 1998 or the funding of the replacement loan
    facility provided Signature, as part of such extension, pledges the stock of
    certain Signature subsidiaries, provides limited guarantees from certain
    Signature subsidiaries, and agrees to certain additional terms specified by
    the lenders. Signature has requested a further extension of the maturity
    date of the loan through September 1998 from the lenders. Although the
    Company believes the lenders will extend the maturity date of the loan, it
    cannot assure that such request will be granted. On August 13, 1998, the
    Company filed a motion with the Bankruptcy Court to permit a debtor
    subsidiary of the Company to lend Signature the funds to repay its loan. The
    Creditors Committee has indicated it will support the Company's motion. Any
    such loan will require approval of the DIP Facility lenders.

                                       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>
                                                    July 4,  January 3,
         (In millions)                               1998      1998
                                                    -------  ----------
         <S>                                         <C>       <C>
         Accounts payable                            $1,364    $1,340
         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                46        51
         Lease and other contract rejection claims      103       104
         Other liabilities                              590       629
                                                     ------    ------
                                                     $3,433    $3,468
                                                     ======    ======


         </TABLE>


    The Company has $80 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 $61 million for the 13-week and 26-week periods
    ended July 4, 1998.

5.  Insurance, Benefits and Losses

    Operating, selling, general and administrative expenses include benefits and
    losses related to direct response marketing operations of $26 million and
    $37 million for the 13-week periods ended July 4, 1998 and June 28, 1997,
    respectively, and $65 million and $71 million for the 26-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          26-Week
                                             Period Ended     Period Ended
                                             July 4, 1998     July 4, 1998
                                             ------------     ------------
<S>                                          <C>              <C>
Wards store closings                              26               $26
Interim Account Agreement Fees (Note 9)            6                12
Professional fees                                  5                10
Distribution center closings                       8                 8
Other                                             14                21
Interest income                                   (1)               (3)
                                             ------------     ------------
                                                 $58               $74
                                             ============     ============
</TABLE>
 
    In June 1998, the Bankruptcy Court approved a motion filed by Wards to close
    an additional nine underperforming stores. The Company recorded a pre-tax
    charge of $26 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 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.  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
                                                         July 4, 1998                        June 28, 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                            $       (67)       $       (67)      $      (112)     $      (109)  
                                                                                            
     Weighted-average number of common                                                           
        shares outstanding                       18,322,174         25,000,000        18,322,248       25,000,000  
                                                                                            
     Net loss per share                         $     (3.68)       $     (2.70)      $     (6.10)     $     (4.36)  
</TABLE>                            
                                    
<TABLE>                             
<CAPTION>                           
                                                      For the 26-Week                     For the 26-Week
                                                        Period Ended                       Period Ended
                                                        July 4, 1998                       June 28, 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                           $      (122)      $      (122)      $      (185)     $      (180)
                                                                                           
     Weighted-average number of common                                                          
        shares outstanding                      18,322,195        25,000,000        18,322,248       25,000,000
                                                                                           
                                                                                           
     Net loss per share                        $     (6.67)      $     (4.89)      $    (10.08)     $     (7.21)
</TABLE>

    Basic and diluted earnings per share are the same for the 13-week and 26-
    week periods ended July 4, 1998 and June 28, 1997, as all common stock
    equivalents are antidilutive due to the net loss incurred during these
    periods.

8.  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.

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


9.  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 second quarter of 1998 to the second quarter of 1997,
    as well as the first six months of 1998 to the first six 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

Second Quarter 1998 Compared with Second Quarter 1997

    Consolidated total revenues (net sales and direct response marketing
    revenues, including insurance) were $1,055, compared with $1,365 in the
    second quarter 1997, decreasing by $310, or 23%. The decrease was caused by
    the decline in net sales (a 27% decrease). Sales on a comparable store basis
    decreased approximately 5% after adjusting for the closing of stores and the
    exit of the personal computer product line. The decrease in net sales is
    attributable to the closing of 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. The closed stores reported net sales of $242 in the
    second quarter of 1997. The sales decrease was also caused by the Company's
    decision in the third quarter of 1997 to exit its personal computer product
    offerings which reported sales of $26 in the second quarter 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 second quarter of 1997
    contributed to the second quarter 1998 sales decrease.




                                        

                                       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)

Second Quarter 1998 Compared with Second Quarter 1997 (continued)

    Gross margin (net sales less cost of goods sold) dollars were $163, an
    increase of $82, or 101%, from the second quarter 1997. This increase was
    due to an increase in the gross margin rate on sales of $140 and decreased
    occupancy and other margin-related expenses of $31 primarily related to the
    closed stores, offset by the gross margin impact of decreased sales of $89.
    The improvement of 12 percentage points in the gross margin rate in the
    second quarter of 1998 as compared to the second quarter of 1997 was due to
    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. The increase
    in the margin rate for comparable stores was attributable to a more
    profitable, trend-right product offering, as well as the negative impact of
    the aggressive markdowns strategy employed in the second quarter of 1997 to
    liquidate inventories.

    Operating, selling, general and administrative expenses decreased $156, or
    26%, from the second quarter 1997. The decrease is due to decreased payroll
    costs primarily related to the closing of the Wards and Electric Avenue &
    More stores of $41, write-downs of investments and other unrealizable assets
    in the prior year of $38, 1997 operating, selling, general and
    administrative costs incurred by Lechmere of $39, decreased advertising and
    other promotional costs of $32, increased pension income of $5, and a
    decrease in all other costs of $16, offset by increased bad debt expense of
    $10 and decreased product service income of $5.

    Net interest expense decreased $31, or 67%, 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 second
    quarter of 1998, excluding pre-petition debt, decreased by approximately
    $1,000 as compared to the second quarter of 1997.

    No income tax benefit was recorded for the second quarter of 1998 as
    compared to a benefit of $129 for the second quarter of 1997 due to the
    Company's substantial net operating loss carryforwards.

First Six Months of 1998 Compared with First Six Months of 1997

    Consolidated total revenues (net sales and direct response marketing
    revenues, including insurance) were $2,046, compared with $2,694 in the
    first six months of 1997, decreasing by $648, or 24%. The $648 total revenue
    decrease consisted of a $657 decrease in net sales (a 29% decrease) and a $9
    increase in direct marketing revenues (a 2% increase). Sales on a comparable
    store basis decreased approximately 7% after adjusting for the closing of
    stores and the exit of the personal computer product line. The increase in
    direct response marketing revenues was primarily due to new product line
    sales. The decrease in net sales is attributable to the closing of 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. The closed stores
    reported net sales of $487 in the first six months of 1997. The sales
    decrease was also caused by the Company's decision in the third quarter of
    1997 to exit its personal computer product offerings which reported sales of
    $53 in the first six 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.

                                       14
<PAGE>
 
                         MONTGOMERY WARD HOLDING CORP.
                                        

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

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

    Gross margin (net sales less cost of goods sold) dollars were $310, an
    increase of $107, or 53%, from the first six months of 1997. This increase
    was due to an increase in the gross margin rate on sales of $230 and
    decreased occupancy and other margin-related expenses of $66 primarily
    related to the closed stores, offset by the gross margin impact of decreased
    sales of $189. The improvement of 10 percentage points in the gross margin
    rate in the first six months of 1998 as compared to the first six 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.
    The increase in the margin rate for comparable stores was attributable to a
    more profitable, trend-right product offering, as well as the negative
    impact of the aggressive markdowns strategy employed in the first six months
    of 1997 to liquidate inventories.

    Operating, selling, general and administrative expenses decreased $227, or
    20%, from the first six months of 1997. The decrease is primarily due to the
    closing of the Lechmere, Inc. stores of $80, decreased payroll costs
    primarily related to the closing of the Wards and Electric Avenue & More
    stores of $73, decreased advertising and other promotional costs of $57,
    write-downs of investments and other unrealizable assets in the prior year
    of $38, increased pension income of $9, and a decrease in all other costs of
    $10, offset by increased bad debt expense of $20 and decreased product
    service income of $20.
    
    Net interest expense decreased $58, or 67%, 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
    six months of 1998, excluding pre-petition debt, decreased by approximately
    $1,000 as compared to the first six months of 1997.

    No income tax benefit was recorded for the first six months of 1998 as
    compared to a benefit of $214 for the first six months of 1997 due to the
    Company's substantial net operating loss carryforwards.

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.


                                        

                                       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 in the Company's operating activities totaled $196 compared to
    $371 for the first six months of 1998, a decrease of $175.  The lower cash
    usage is summarized as follows:

<TABLE>
          <S>                                            <C>      
          Cash impact of smaller operating loss          $    348 
          Net cash received from facility closings             45 
          Lower cash provided by inventory                   (210)
          All other cash from operations                       (8)
                                                         --------
                                                         $    175 
                                                         ======== 
</TABLE>
                                                                                
    The lower cash provided by inventory was due to the significant amount of
    discontinued merchandise sold in the second quarter of 1997 as part of the
    Company's effort to reduce discontinued merchandise.

    Net cash provided by financing activities totaled $230 for the first six
    months of 1998, compared to $397 for the first six 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 $250 in the first six months of
    1998.

    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 $300 and letters of credit
    outstanding were $141 at July 4, 1998. The Company had $437 of borrowing
    availability under the DIP Facility at July 4, 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)

    Signature borrowed $102 under a Credit Agreement ("Signature Credit
    Agreement") dated as of September 27, 1996 as amended and restated October
    21, 1996 between Signature and various lenders, as further modified and
    amended. The proceeds were used to repay the intercompany loan from Wards to
    Signature arising from Signature's acquisition of the Amoco Motor Club. The
    loan matured on January 31, 1998 and has not been repaid. The lenders agreed
    to extend the maturity date of the loan under the Signature Credit Agreement
    to the earlier of July 31, 1998 or the funding of the replacement loan
    facility provided Signature, as part of such extension, pledges the stock of
    certain Signature subsidiaries, provides limited guarantees from certain
    Signature subsidiaries, and agrees to certain additional terms specified by
    the lenders. Signature has requested a further extension of the maturity
    date of the loan through September 1998 from the lenders. Although the
    Company believes the lenders will extend the maturity date of the loan, it
    cannot assure that such request will be granted. On August 13, 1998, the
    Company filed a motion with the Bankruptcy Court to permit a debtor
    subsidiary of the Company to lend Signature the funds to repay its loan. The
    Creditors Committee has indicated it will support the Company's motion. Any
    such loan will require approval of the DIP Facility lenders.

    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.

    On June 25, 1998, Wards entered into a Purchase and Sale Agreement
    ("Agreement") with respect to the sale of its corporate complex in Chicago,
    Illinois and the leaseback of certain office space. On July 15, 1998, the
    Bankruptcy Court approved the "First Sale Order" which authorized the sale
    of the property, pursuant to the terms of the Agreement. The purchaser has
    until September 13, 1998 to conduct due diligence and notify Wards whether
    they will proceed with the terms of the Agreement. An auction will be held,
    pursuant to the terms of the Agreement and a Bankruptcy Court order, between
    60 and 63 days after such approval is provided. If such sale were to occur
    based on the terms of the Agreement, the Company would expect to recognize a
    gain, although such amount has not yet been quantified.

    The Company continues to incur costs as a result of modifying existing
    software programs and the purchase and installation of new software
    associated with the Year 2000 date change issue. Based on the Company's
    plans and amounts expended, the total future costs to address the date
    change issue are not expected to materially impact future cash flows.

                                       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)

    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

    On June 21, 1998, the Voting Trust Agreement dated as of June 21, 1998,
    under which Voting Trust Certificates representing shares of Class A Common
    Stock, Series 1 and Series 2, of the Company had been issued, expired
    pursuant to its terms.

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) (H) (6)   Fifth Amendment to the Long Term Credit Agreement
                           dated as of May 22, 1998 among Montgomery Ward and
                           Co., Incorporated, various banks, The First National
                           Bank of Chicago, as Documentary Agent, The Bank of
                           Nova Scotia, as Administrative Agent, The Bank of New
                           York, as Negotiated Loan Agent and Bank of America
                           National Trust and Savings Association, as Advisory
                           Agent.

       10. (i) (I) (7)     Fifth Amendment to the Short Term Credit Agreement
                           dated as of May 22, 1998 among Montgomery Ward and
                           Co., Incorporated, various banks, the First National
                           Bank of Chicago, as Documentary Agent, The Bank of
                           Nova Scotia, as Administrative Agent, The Bank of New
                           York, as Negotiated Loan Agent and Bank of America
                           National Trust and Savings Association, as Advisory
                           Agent.

       10. (i) (L) (6)     Waiver, Amendment and Extension Agreement dated as of
                           January 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.

       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:                         August 18, 1998
 

                                       20
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------


10. (i) (H) (6)     Fifth Amendment to the Long Term Credit Agreement dated as
                    of May 22, 1998 among Montgomery Ward and Co., Incorporated,
                    various banks, The First National Bank of Chicago, as
                    Documentary Agent, The Bank of Nova Scotia, as
                    Administrative Agent, the Bank of New York, as Negotiated
                    Loan Agent and Bank of America National Trust and Savings
                    Association, as Advisory Agent.

10. (i) (I) (7)     Fifth Amendment to the Short Term Credit Agreement dated as
                    of May 22, 1998 among Montgomery Ward and Co., Incorporated,
                    various banks, The First National Bank of Chicago, as
                    Documentary Agent, the Bank of Nova Scotia, as
                    Administrative Agent, The Bank of New York, as Negotiated
                    Loan Agent and Bank of America National Trust and Savings
                    Association, as Advisory Agent.

10. (i) (L) (6)     Waiver, Amendment and Extension Agreement dated as of
                    January 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.

27.                 Financial Data Schedule.