<PAGE>
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1997
______________________________________________________________________________


                     SECURITY AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549
                        --------------------------
 
                                 FORM 10-K/A
                              (Amendment No. 1)
                        --------------------------

(Mark One)
[X]   ANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
      For the fiscal year ended March 1, 1997

                                               OR
[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from_________________ to __________________

                       Commission File Number 0-24904

                                 STROUDS, INC.
            (Exact name of registrant as specified in its charter)

           DELAWARE                                          95-4107241
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                        Identification Number)

                           780 SOUTH NOGALES STREET
                          CITY OF INDUSTRY, CA 91748
                   (Address of principal executive offices)

                                 (818) 912-2866
             (Registrant s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:     None

Securities registered pursuant to Section 12(g) of the Act:

                             TITLE OF EACH CLASS
                       Common stock, par value $0.0001


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


                        (Page 1 of 2 Page Cover Page)



<PAGE>

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]

The aggregate market value of the voting stock held by non affiliates of the
Registrant, based upon the closing sales price of the Common Stock on May 20,
1997 as reported on the Nasdaq National Market, was approximately $10,446,707.

Number of shares of Common Stock outstanding at May 20, 1997:   8,535,812



                     DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for Registrant s 1997 Annual Meeting of
Stockholders are incorporated by reference into Part III, to be filed no later
than June 27, 1997.


                         (Page 2 of 2 Page Cover Page)







































<PAGE>

                                    PART II
                                    -------


ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

Item 6 is hereby amended and restated in its entirety as follows:


                                      STROUDS, INC.
                          SELECTED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
(IN THOUSAND EXCEPT PER SHARE 
 AND OPERATING DATA)                    1996     1995(1)    1994      1993      1992
------------------------------        --------  --------  --------  --------  --------
<S>                                  <C>        <C>       <C>       <C>       <C>
INCOME STATEMENT DATA:
   Net sales                          $209,778  $190,316  $174,585  $158,081  $149,297
   Operating income (loss)             (23,118)    4,704     7,647     6,663     3,900
   Net income (loss)                   (21,968)    2,570     3,019     2,018     1,852

   Net income (loss) per share           (2.58)     0.30      0.47      0.35      0.35
   Weighted average common and common
      equivalent shares outstanding(2)   8,521     8,622     6,357     5,603     5,047

OPERATING DATA:
   Stores at end of period:
      Superstores                           50        46        37        29        26
      Home decorating center                 1       ---       ---       ---       ---
      Outlet stores                         14        10         9         7         7
      Original format stores                 2         5         8        13        16
                                      --------  --------  --------  --------  --------
                                            67        61        54        49        49
                                      ========  ========  ========  ========  ========

Total square footage at end of       1,050,080   850,858   664,319   539,924   516,426
   period
Comparable store net sales
   increase (decrease)(3)                  0.1%     (3.4)%     5.4%      2.7%     (0.5)%

BALANCE SHEET DATA (AT END OF PERIOD):
      Working capital                 $ 44,663  $ 42,879  $ 31,264  $ 26,172  $ 18,301
      Total assets                     112,104    94,007    83,185    68,141    59,929
      Long-term debt, including
         current maturities             32,693    12,683     1,367    29,729    29,804
      Redeemable preferred stock           ---       ---       ---     1,000     1,000
      Stockholder s equity              33,573    55,469    52,272    13,086    11,180
</TABLE>
(1)   53 weeks

(2)   Includes as common equivalent shares the shares of Common Stock issuable
      upon exercise of the warrants and outstanding employee stock options,
      unless anti-dilutive.  Shares of Common Stock subject to options and
      warrants issued within one year of the initial public offering date are
      reflected as outstanding for all periods presented, pursuant to the
      treasury-stock method.


                                        Page 3



<PAGE>
(3)   A new store or a converted or expanded store becomes comparable after it
      has been open under the same format for 13 months.  Comparable store net
      sales are calculated by comparing new sales for comparable stores on a
      fiscal month basis in the respective periods.



ITEM 7.  MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATION
------------------------------------------------------------------------

Item 7 is hereby amended and restated in its entirety as follows:



                               STROUDS, INC.

                    MANAGEMENT S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


OVERVIEW

The following sets forth certain factors that have affected the Company s
results of operations, and management believes will continue to affect the
Company in the future.


Expansion Strategy

Commencing in late 1994, the Company began its initial expansion outside its
traditional core markets in California.  This strategy, as in the past, was
primarily centered around clustering stores in order to take advantage of
operating efficiencies and to promote the Strouds brand name in each new
market.  Over the past two years the Company has opened 10 superstores in the
greater Chicago and Minneapolis markets ( Midwest Markets ), 1 superstore in
the greater Washington, D.C. market and 1 store in Reno, Nevada.  Subsequent
to the year just ended, the Company opened an additional store in the greater
Washington, D.C. market.  To date, sales volumes have been below expectations
resulting in higher store operating, administrative and advertising costs as a
percent of sales than is currently experienced in the Company s California
markets.  Management believes a critical factor associated with the lower
sales is the time it takes to penetrate the market and build consumer
awareness of the Strouds brand name and image in new markets.

During fiscal 1996, the Company believed it achieved the critical mass
necessary for advertising in its Midwest markets and increased its
expenditures for advertising in an effort to develop consumer awareness of the
Strouds concept and build store sales volumes.  Though the Company has made
progress in building sales volumes in these markets, they remain below
anticipated levels.

In addition to the expansion into new markets outside of California, the
Company continues to open and/or reposition stores in its California markets. 
During fiscal 1996, the Company opened 2 new superstores, expanded 1
superstore and converted 1 superstore and 3 original format stores to Strouds
outlet format.  In addition, the Company opened a 50,000 square foot prototype


                                    Page 4


<PAGE>
store in Irvine, California offering a broad range of home furnishings and
design services. The Company has committed to open 2 additional superstores in
1997.  This continued development activity in California has from time to time
negatively impacted the sales of existing Strouds stores.  Management has
believed that the benefits of strengthening its market presence and adjusting
to demographic shifts in the California marketplace have generally outweighed
the reduced sales impact experienced by an existing nearby Strouds store.

In March 1997, the Company opened 1 new superstore in the greater Washington,
D.C. market.  The majority of the capital expenditures and preopening expenses
for this store were incurred in fiscal 1996.  The Company s commitment to open
2 additional new superstores in fiscal 1997 will result in preopening expenses
of approximately $100,000 per store and are expensed as incurred.  The Company
anticipates its required investment for each new superstore, before leasehold
improvements, will be approximately $1.5 million per store in fiscal 1997,
consisting of approximately $500,000 for store furniture, fixtures and
equipment and approximately $1.0 million for inventory.  In addition, the
Company anticipates spending, in the aggregate, approximately $150,000 for
leasehold improvements in connection with its new store development plans.

Change in Store Format

In 1988, the Company changed from its original format, which included stores
ranging from 5,000 to 10,000 square feet, to a larger superstore format, which
average approximately 17,600 square feet.  The Company has continued to
increase the size of its superstores which have averaged approximately 23,400
square feet for new and expanded stores opened in the past two years.  Since
the opening of the first superstore, all of the Company s new stores have used
the superstore format (other than 5 stores opened as outlet stores and the
Company s prototype store in Irvine, CA).  By the end of fiscal 1997, the
Company will have converted all of its original format stores to the
superstore or outlet format.

The primary purpose of the Company s shift to the superstore format has been
to meet the demands of an increasingly competitive environment.  These stores
feature improved merchandise presentations, new merchandise categories, higher
quality fixtures and an overall ambiance that management believes
substantially improves the Strouds shopping experience.  The Company s
superstores, on average, have experienced higher sales volume but lower sales
per square foot than the Company s original format stores.  As a result,
although the Company s occupancy costs per square foot have not risen
significantly, occupancy cost as a percentage of net sales have increased. 
This has adversely affected the Company s gross profit, which includes buying,
occupancy and distribution expenses.  Because of the impact of the shift in
store format on average store-level performance, results in different periods
may not be comparable.

Restructuring and Asset Impairment

In light of the factors noted above, the Company initiated a comprehensive
restructuring and cost reduction plan (the  Restructuring Plan ), resulting in
a pretax charge of $16.3 million or $1.91 per share.  The Restructuring Plan
is designed to improve the operating performance of the Company through the
closure or disposition of up to 16 underperforming stores and implementing
cost reduction measures, including workforce reductions, to more closely align
the Company s cost structure with future expected revenues.  Management


                                    Page 5



<PAGE>
believes that the closing and disposition of up to 16 stores will approximate
2 years to complete.

The Company recorded a pretax charge of $1.8 million or $0.21 per share for
the impairment of certain operating assets.  The principal factors leading up
to the charge were current and future operating losses on individual operating 
assets, whereby the carrying value of certain operating assets exceeded the
current estimate of future cash flows from the related asset. The Company will
continually evaluate the performance of its operating assets for the factors
noted above and, if conditions warrant, write-down the value of such assets
commensurate with the current and estimated future operating performance.


RESULTS OF OPERATIONS

The following table sets forth selected income statement data expressed as a
percentage of net sales for the period indicated:
<TABLE>
<CAPTION>
                                      March 1,     March 2,   February 25,
Fiscal year ended                       1997         1996         1995
--------------------------------------------------------------------------
<S>                                    <C>          <C>          <C>
Net sales                              100.0%       100.0%       100.0%
Cost of sales, buying and occupancy     71.8         68.9         68.0
                                       ------       ------       ------
Gross profit                            28.2         31.1         32.0
Selling and administrative expenses     30.5         28.5         27.5
Restructuring costs                      8.6          ---          ---
Amortization of intangibles              0.1          0.1          0.1
                                       ------       ------       ------
Operating income (loss)                (11.0)         2.5          4.4
Other income                             0.2          0.2          0.1
Interest expense, net                   (0.9)        (0.4)        (1.3)
                                       ------       ------       ------
Income (loss) before income taxes      (11.7)         2.3          3.2
Income taxes                             1.2         (0.9)        (1.5)
                                       ------       ------       ------
Net income (loss)                      (10.5%)        1.4%         1.7%
                                       ======       ======       ======
</TABLE>

Fiscal 1996 Compared To Fiscal 1995

Fiscal 1996 was a 52-week year and fiscal 1995 was a 53-week year.  For
purposes of determining comparable store sales, fiscal 1995 was adjusted to
reflect a comparable 52-week year.  Due to ongoing changes in the Company s
store format and other factors, results in different periods may not be
comparable.

Net sales for fiscal 1996 increased $19.5 million, or 10.2%, to $209.8 million
versus $190.3 million in fiscal 1995.  Comparable store sales increased $0.3
million, or 0.1%, for the period. Approximately 18% of the comparable stores
were affected by new competitive openings for fiscal 1996 compared to
approximately 25% for the same period last year.  Sales from new stores and
expanded or replacement stores increased by $19.2 million.

Cost of sales, buying and occupancy for fiscal 1996 were $150.6 million versus
$131.2 million for the same period a year ago, a $19.4 million increase.  This


                                    Page 6


<PAGE>
dollar increase was attributable, primarily, to new and expanded stores.  As a
percent of net sales, cost of sales, buying and occupancy increased to 71.8%
from 68.9% for the same period a year ago. The reduced gross margin was due to
a higher level of markdown volume versus a year ago.  Additionally, higher
occupancy costs associated with new and expanded stores, where average store
sales were lower, reduced gross margin.  

Selling and administrative expenses for fiscal 1996 increased $9.8 million to
$64.0 million versus $54.2 million for fiscal 1995 and increased as a
percentage of net sales from 28.5% to 30.5%.  The increase as a percent of net
sales was primarily due to initial operating expenses associated with new
stores and increased advertising costs to further develop the company s
Midwest markets.  General and administrative expense was 6.1% of net sales for
fiscal 1996 and comparable to the prior year.

During the fourth quarter of fiscal 1996, the Company incurred restructuring
and asset impairment charges of $18.1 million.  This included a pretax charge
of $16.3 million or $1.91 per share for a comprehensive restructuring plan
(the  Restructuring Plan ).  The Restructuring Plan is designed to improve the
operating performance of the Company through closure or disposition of up to
16 underperforming stores and implementing cost reduction measures, including
workforce reductions, to more closely align the Company s cost structure with
future expected revenues.  The $16.3 million cost consisted of the write-off
of fixed assets, termination or lease subsidy costs, inventory liquidation
expenses and employee severance and other related costs.  The net sales and
store level operating losses in 1996 of the stores to be closed were
approximately $42.9 million and $2.5 million, respectively.  Management plans
to continue to operate these stores, where appropriate, in the current format
or if circumstances warrant, convert to the outlet format in order to improve
cash flow and minimize the ultimate cost of disposition.  Accordingly, future
earnings may be negatively impacted until the Restructuring Plan is completed. 
Cash outflows related to the Restructuring Plan will approximate $3.5 million
for fiscal 1997.  The cash outflow is related to disposal costs for the
closure of 3 stores, including lease termination and subsidy costs and
severance and related expenses for workforce reductions.  In addition, the
Company recorded a pretax charge of $1.8 million or $0.21 per share for the
impairment of certain operating assets.  The principal factors leading up to
the charge were current and future operating losses on individual operating
assets, whereby the carrying value of certain operating assets exceeded the
current estimate of future cash flows from the related asset.

As a result of the factors noted above, the Company had an operating loss for
fiscal 1996 of $23.1 million versus operating income of $4.7 million for the
same period a year ago, a $27.8 million decrease.  Excluding charges related
to the Restructuring Plan and the impairment of certain assets, the operating
loss for fiscal 1996 would have been $5.1 million.

Interest expense, net, increased $1.1 million to $1.8 million for fiscal 1996
versus $0.7 million for fiscal 1995.  Interest expense grew as a result of
increased borrowings to finance the development of new stores and the
expansion of existing stores.

The Company recognized a tax benefit for fiscal 1996 of $2.5 million versus
income tax expense of $1.7 million for the same period a year ago.  The income
tax benefit in fiscal 1996 is due to the carryback of current year tax losses
to prior years resulting in a refund of prior years income taxes.


                                    Page 7



<PAGE>
Fiscal 1995 Compared To Fiscal 1994

Fiscal 1995 was a 53-week year and fiscal 1994 was a 52-week year.  For
purposes of determining comparable store sales, fiscal 1995 was adjusted to
reflect a comparable 52-week year.  Due to new store openings, ongoing changes
in the Company s store format and other factors, results in different periods
may not be comparable.

Net sales in fiscal 1995 increased $15.7 million, or 9.0%, to $190.3 million
versus $174.6 million in fiscal 1994.  Comparable store sales decreased $5.2
million, or 3.4%, for the period.  Sales from noncomparable stores (i.e., new
stores and expanded or replacement stores) increased by $22.4 million.  Net
sales were reduced by $1.5 million due to one store closure last year.

The decrease in comparable stores sales consisted of a decrease of 6.0%
through the first three quarters of fiscal 1995 which represented a
continuation of the declining sales trend which began during the fourth
quarter of fiscal 1994.  Management believes the decrease in comparable store
sales is volume related and primarily attributable to several factors
including a general economic slowdown as a result of rising interest rates. 
Rising interest rates in the last half of 1994 had the effect of reducing
turnover of both new and existing housing and reducing disposable income as
adjustable mortgages were revised upward.  Management believes that spending
on home furnishings is correlated with housing turnover.  In addition,
economic conditions in California, where the majority of the Company s
comparable stores are located, were further impacted by higher levels of
unemployment related to continuing reductions in defense and construction
spending, as well as the Orange County bankruptcy and Los Angeles County s
financial difficulties.  These events prompted Southern California residents
to be concerned about unemployment and increased taxes which had a dampening
effect on consumer spending.  Significant new competitive openings also
contributed to lower sales levels.  Approximately 25% of the comparable stores
were affected by new competitive openings which did not exist during fiscal
1994.  Similarly, the sales gains achieved in fiscal 1994 were aided by strong
replacement business in the aftermath of the Northridge, California earthquake
and reduced competition from competitors whose stores were damaged.

Comparable net sales for the fourth quarter of fiscal 1995 increased 3.4%.  An
improving California economy and a smaller negative sales impact related to
competitive openings for the fourth quarter of fiscal 1995 versus the same
period a year ago contributed to the fourth quarter comparable sales growth. 
Approximately 12% of the comparable stores were affected by new competitive
openings in the fourth quarter of 1995 compared to approximately 28% for the
same period last year.

Cost of sales, buying and occupancy for fiscal 1995 were $131.2 million versus
$118.7 million for the same period a year ago, a $12.5 million increase.  As a
percent of sales, cost of sales, buying and occupancy increased to 68.9% from
68.0% for the same period a year ago.  The increase in cost of sales, buying
and occupancy was due to lower comparable store sales and below average sales
volumes for new store openings in the Company s Midwest markets.  Lower sales
volume had the effect of increasing occupancy costs as a percentage of sales
one percentage point.

Selling and administrative expenses for fiscal 1995 increased $6.2 million to
$54.2 million versus $48.0 million for fiscal 1994 and increased as a
percentage of net sales from 27.5% to 28.5%.  The increase as a percent of


                                    Page 8


<PAGE>
sales was primarily due to labor and other store operating expense
inefficiencies due to lower sales volume at comparable stores and lower than
average sales volumes for new stores opened in the Midwest.  General and
administrative expense as a percent of sales was 6.1% versus 6.7% a year ago. 
Reduced spending levels for administrative support partially mitigated the
overall increase in selling and administrative expenses.

Operating income for fiscal 1995 was $4.7 million versus $7.6 million for the
same period a year ago, a $2.9 million decrease.  Operating income margin was
2.5% for fiscal 1995 and 4.4% for fiscal 1994.  Operating income margin
declined due to the reasons discussed above.

Interest expense, net, decreased $1.6 million to $0.7 million for fiscal 1995
versus $2.3 million for fiscal 1994.  The Company repaid substantially all of
its outstanding indebtedness, $30.4 million, upon completion of its initial 
public offering in October 1994.  The Company expects interest expense to
increase in fiscal 1996 as it increases its borrowings to finance its
expansion programs.

Income tax expense was $1.7 million for fiscal 1995, a decrease of $0.7
million from fiscal 1994.  The Company s lower pretax income and effective tax
rate, the result of increased tax deductions related to the exercise of non-
qualified stock options, contributed to the decrease in income tax expense. 
The estimated effective rate is subject to continuing evaluation and
modification by management.


LIQUIDITY AND CAPITAL RESOURCES

The Company s cash needs are primarily to support its inventory requirements,
store expansion and refurbishment and systems development.  The Company has
historically financed its operations primarily with internally generated funds
and its credit facilities.  At March 1, 1997, the Company s working capital
was $44.7 million, while advances from its revolving promissory note (the
 Credit Facility ) were $29.9 million.  The Company had $7.6 million and $2.1
million available for borrowings under its credit facility as determined by
the Company s eligible  borrowing base" at March 1, 1997 and May 3, 1997,
respectively.

Cash provided by (used in) operating activities for fiscal 1996 was ($4.7)
million.  During fiscal 1996, inventory increased $9.8 million as a result of
the Company s store growth, new merchandise categories and to improve out-of-
stock rates on higher sales volume goods.

Net cash used in investing activities for fiscal 1996 was $13.3 million. 
These funds were used principally for capital expenditures supporting the
Company s store expansion programs and systems development.  In fiscal 1996,
the Company opened a prototype home decorating center, 6 new superstores,
expanded 1 superstore, converted 1 superstore and 3 original format stores
into outlet stores, and closed 1 superstore.  In March 1997, the Company
opened 1 new superstore in the Washington, D.C. market.  The majority of the
capital expenditures and preopening expenses for this store were incurred in
fiscal 1996.

The Company s capital expenditures for fiscal 1997 are currently expected to
be approximately $3.5 million and will relate primarily to the Company s
commitment to develop 2 additional new superstores, convert 3 superstores and


                                    Page 9


<PAGE>
1 original format store to outlet stores and continue to improve the Company s
management information systems.  The commitment to open 2 additional new
superstores in fiscal 1997 will approximate $1.0 million for furniture,
fixtures and equipment, and $150,000 for related leasehold improvements.  The
Company plans to convert 3 superstores and 1 original format store into outlet
stores in fiscal 1997, which will require estimated capital improvements of
$35,000 per store.  Existing store expansion and improvements will cost
approximately $1.0 million.  In addition to capital improvements, the Company
estimates that the gross inventory requirements of a new superstore will be
approximately $1.0 million per store.  The Company also plans to spend $1.0
million in fiscal 1997 for replacement, enhancements and upgrades of its
management information systems.

The actual per store costs the Company will incur in opening new stores will
vary based upon, among other things, geographic location, the size of the
store and the extent of the build-out required at the selected site.  The
Company s strategy is to lease new store sites, thus preserving its capital
for store and inventory growth.

Preopening costs, such as travel, hiring and training of new employees and
supplies, are expensed as incurred and, prior to fiscal 1994, have not been
material.  The Company estimates preopening costs will average approximately
$100,000 per new store, with only nominal preopening costs incurred for
converted or expanded stores.

Cash provided by financing activities for fiscal 1996 was $18.5 million.  The
Company had net borrowings of $20.2 million primarily associated with the
factors noted above and to meet other working capital needs in fiscal 1996.

The Company s $40 million revolving promissory note contains various
restrictions on the payment of cash dividends, incurrence of additional
indebtedness, acquisitions, capital expenditures, investments and disposition
of assets. The covenants also require the Company to meet certain net income
levels, as defined, determined at the end of each fiscal quarter on a fiscal
year-to-date basis.  As of March 1, 1997, the Company was in breach of its net
income covenant.  The provider of the Credit Facility has waived that
requirement as of March 1, 1997.

On May 29, 1997, the Company and the provider of its Credit Facility agreed to
amend certain terms and conditions of the Credit Facility.  Under the amended
terms and conditions, the Company's covenants will be reset to be reflective
of the Company's anticipated earnings, capital expenditures and cash flow over
the remaining term of the Credit Facility.  Borrowings may not exceed 65% of
eligible inventory through August 31, 1998 and 60% thereafter except,
borrowings may be increased to 65% for 120 consecutive days commencing April
1, 1999.  Interest will be payable at the provider's prime rate plus 1.125% or
LIBOR plus 3.25%.  Commencing with the fiscal year beginning March 1, 1998,
the Company can lower its interest rate spread up to a maximum of 1.00%
provided it achieves certain specified earnings targets measured on a
quarterly year-to-date basis.  In addition, the Company has also agreed to
provide all of its unencumbered fixed assets as additional security to the
Credit Facility.

In conjunction with the Company s Restructuring Plan, the Company plans to
close 3 stores in fiscal 1997.  These stores had combined net sales and store
level operating losses of $6.3 million and $1.3 million, respectively.  Cash



                                    Page 10


<PAGE>
outflows related to the Restructuring Plan will approximate $3.5 million for
fiscal 1997.  The cash outflow is related to disposal costs for the closure of
3 stores, including lease termination and subsidy costs and severance and
related expenses for workforce reductions.

Management believes that funds generated from operations, its Credit Facility
and use of trade credit will be sufficient to satisfy the Company s working
capital requirements and commitments for capital expenditures through fiscal
1997.  The Company anticipates that it will spend approximately $5 million in 
fiscal 1997 to finance new store openings, store conversions and expansions,
information systems development, inventory and preopening costs.


INFLATION

The Company does not believe that inflation has had or will have a material
adverse effect on net sales or results of operations.  The Company has
generally been able to pass on increased costs through increases in selling
prices.


SEASONALITY AND QUARTERLY FLUCTUATIONS

The Company s business is subject to seasonal and quarterly fluctuations. 
Historically, the Company has realized a higher portion of its net sales and 
an even greater proportion of its profits in the months of November, December
and January.  Additionally, the timing of promotional events may affect the
Company s results in different quarters from year to year.  The Company may
encounter different seasonality factors as it enters new markets outside of
California.  The timing of new store openings and related preopening expenses,
and the amount of net sales contributed by new and existing stores, may also
cause the Company s quarterly results of operations to fluctuate.


NEW PRONOUNCEMENTS BY FINANCIAL ACCOUNTING STANDARDS BOARD

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ( SFAS ) No. 128  Earnings Per Share.   SFAS
No. 128 specifies new standards designed to improve the earnings per share
( EPS ) information provided in financial statements by simplifying the
existing computational guidelines, revising the disclosure requirements and
increasing the comparability of EPS data on an international basis.  Some of
the changes made to simplify the EPS computations include: (a) eliminating the
presentation of primary EPS and replacing it with basic EPS, with the
principal difference being that the common stock equivalents are not
considered in computing basic EPS, (b) eliminating the modified treasury stock
method and the three percent materiality provision and (c) revising the
contingent share provisions and the supplemental EPS data requirements.  SFAS
No. 128 also makes a number of changes to existing disclosure requirements. 
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods.  The Company estimates
that the implementation of SFAS No. 128 will not have a material impact on the
Company s financial statements.






                                    Page 11


<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF  SAFE HARBOR  PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements contained in this Management s Discussion and Analysis of
Financial Condition and Results of Operations that are not related to
historical results are forward-looking statements.  Actual results may differ
materially from those projected or implied in the forward-looking statements. 
Further, certain forward-looking statements are based upon assumptions of
future events which may not prove to be accurate.  These forward-looking
statements involve risks and uncertainties which are more fully described in 
Item 1, Part I of the Company s Annual Report on Form 10-K for the Fiscal Year
Ended March 1, 1997.















































                                    Page 12
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

Item 8 is hereby amended and restated in its entirety as follows:


                                 STROUDS, INC.
                                BALANCE SHEETS
<TABLE>
<CAPTION>
                                                   MARCH 1,       MARCH 2,
(IN THOUSANDS, EXCEPT SHARE DATA)                    1997           1996
---------------------------------                  --------       --------
<S>                                                <C>            <C>
ASSETS
Current assets:
   Cash                                            $    765       $    210
   Accounts receivable, less allowance for
      doubtful accounts of $0 and $25,
      respectively                                    1,957          1,835
   Merchandise inventory                             69,934         60,167
   Prepaid expenses                                   1,835          3,459
   Income taxes receivable                            2,488            ---
   Deferred income taxes                              1,354            786
                                                   --------       --------
      Total current assets                           78,333         66,457
Property and equipment - at cost, net of
   accumulated depreciation and amortization         25,108         18,206
Excess of cost over net assets acquired, net of
   accumulated amortization                           7,789          8,047
Deferred income taxes                                   ---            117
Other assets                                            874          1,180
                                                   --------       --------
      Total assets                                 $112,104       $ 94,007
                                                   ========       ========
LIABILITIES AND STOCKHOLDERS  EQUITY
Current liabilities:
   Current maturities of long-term debt            $    561       $    237
   Accounts payable                                  16,950         14,367
   Accrued expenses                                   9,419          8,974
   Current portion of restructuring reserves          6,740            ---
                                                   --------       --------
      Total current liabilities                      33,670         23,578
Long-term debt                                       32,132         12,446
Restructuring reserves                                9,510            ---
Other non-current liabilities                         3,219          2,514
                                                   --------       --------
      Total liabilities                              78,531         38,538
                                                   --------       --------
Stockholders  equity:
   Preferred stock, $0.0001 par value; authorized
      750,000 shares, no shares issued or
      outstanding                                       ---            ---
   Preferred stock, Series B, $0.0001 par value;
      authorized 250,000 shares; no shares issued
      or outstanding                                    ---            ---
   Common stock, $0.0001 par value; authorized
      25,000,000 shares; issued and outstanding
      March 1, 1997, 8,535,812 shares; and
      March 2, 1996, 8,512,059 shares                     1              1
   Additional paid-in capital                        39,018         38,946
   Retained earnings (accumulated deficit)           (5,446)        16,522
                                                   --------       --------
      Total stockholders  equity                     33,573         55,469
                                                   --------       --------
      Total liabilities and stockholders  equity   $112,104       $ 94,007
                                                   ========       ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                    Page 13

<PAGE>
                                 STROUDS, INC.
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                 FISCAL YEAR ENDED
                                     ----------------------------------------
                                       March 1,       March 2,    February 25,
(IN THOUSANDS, EXCEPT PER SHARE DATA)    1997           1996          1995
------------------------------------ ----------     ----------    -----------
<S>                                  <C>            <C>            <C>
Net sales                            $  209,778     $  190,316     $  174,585
Costs and expenses:
   Cost of sales, buying and
      occupancy                         150,625        131,179        118,697
   Selling and administrative
      expenses                           63,963         54,175         47,983
   Restructuring and asset
      impairment charges                 18,050            ---            ---
   Amortization of excess of cost
      over net assets acquired              258            258            258
                                     ----------     ----------     ----------
                                        232,896        185,612        166,938
                                     ----------     ----------     ----------

      Operating income (loss)           (23,118)         4,704          7,647

Other income                                508            349            180
Interest expense, net                    (1,846)          (735)        (2,311)
                                     ----------     ----------     ----------
      Income (loss) before income
         taxes                          (24,456)         4,318          5,516

Income tax benefit (expense)              2,488         (1,748)        (2,497)
                                     ----------     ----------     ----------
      Net income (loss)              $  (21,968)    $    2,570     $    3,019
                                     ==========     ==========     ==========


Net income (loss) per share          $    (2.58)    $     0.30     $     0.47
                                     ==========     ==========     ==========

Weighted average common and common
   equivalent shares outstanding          8,521          8,622          6,357
                                     ==========     ==========     ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.











                                    Page 14



<PAGE>
                                   STROUDS, INC.
                         STATEMENTS OF STOCKHOLDERS  EQUITY

<TABLE>
<CAPTION>
                                                           Retained
                                  Common stock Additional  earnings      Total
                                 --------------  paid-in (accumulated stockholders 
(IN THOUSANDS)                   Shares  Amount  capital    deficit)      equity
--------------------------       ------  ------  -------  ----------- ------------
<S>                               <C>     <C>    <C>        <C>           <C>
Balance, February 26, 1994        4,324   $  1   $ 2,099    $10,986       $13,086

Net income                          ---    ---       ---      3,019         3,019
Common stock issued in
   public offering                3,200    ---    36,184        ---        36,184
Common stock issued upon
   exercise of options               10    ---        36        ---            36
Common stock issued upon
   exercise of warrants             788    ---       ---        ---           ---
Dividends paid                      ---    ---       ---        (53)          (53)
                                  -----   ----   -------    -------       -------
   Balance, February 25, 1995     8,322      1    38,319     13,952        52,272

Net income                          ---    ---       ---      2,570         2,570
Common stock issued upon
   exercise of options              172    ---       550        ---           550
Common stock issued through
   1994 Employee Stock
   Purchase Plan                     18    ---        77        ---            77
                                  -----   ----   -------    -------       -------
   Balance, March 2, 1996         8,512      1    38,946     16,522        55,469

Net loss                            ---    ---       ---    (21,968)      (21,968)
Common stock issued through 1994
   Employee Stock Purchase Plan      24    ---        72        ---            72
                                  -----   ----   -------    -------       -------
   Balance, March 1, 1997         8,536   $  1   $39,018    $(5,446)      $33,573
                                  =====   ====   =======    =======       =======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

















                                    Page 15




<PAGE>
                                      STROUDS, INC.
                                 STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                 FISCAL YEAR ENDED
                                                          ------------------------------
                                                           March 1, March 2, February 25,
(IN THOUSANDS)                                               1997     1996       1995
------------------------------------                      --------  --------   --------
<S>                                                       <C>       <C>        <C>
Cash flows from operating activities:
   Net income (loss)                                      $(21,968) $  2,570   $  3,019
   Adjustments to reconcile net income (loss)
      to net cash provided by (used in)
      operating activities:
         Depreciation and amortization of property and
            equipment                                        4,476     3,952      3,326
         Restructuring and asset impairment charges         18,050       ---        ---
         Amortization of excess of cost over net assets
            acquired                                           258       258        258
         Deferred income taxes                                (451)      525       (167)
         (Increase) decrease in assets:
            Accounts receivable                               (122)       60       (522)
            Merchandise inventory                           (9,768)   (5,812)   (10,132)
            Prepaid expenses                                 1,625    (1,824)      (236)
            Income taxes receivable                         (2,488)      ---        ---
         Increase (decrease) in accounts payable
          and accrued expenses                               4,579    (5,361)     8,054
         Other                                               1,123       461        583
                                                           -------  --------   --------
          Net cash provided by (used in) operating
           activities                                       (4,686)   (5,171)     4,183
                                                          --------  --------   --------
Cash flows from investing activities:
   Purchases of marketable securities                          ---       ---     (3,223)
   Proceeds from sale of marketable securities                 ---       471      2,752
   Capital expenditures                                    (13,372)   (8,236)    (8,854)
   Other                                                        83       ---        ---
                                                          --------  --------   --------
          Net cash used in investing activities            (13,289)   (7,765)    (9,325)
                                                          --------  --------   --------
Cash flows from financing activities:
   Sale of common stock                                        ---       ---     36,184
   Borrowings under long-term debt                          77,441    42,894      1,630
   Repayments of long-term debt                            (57,194)  (31,094)   (29,490)
   Loan costs incurred                                         ---      (219)       (19)
   Principal payments under capital lease obligations         (237)     (484)      (537)
   (Decrease) increase in overdraft                         (1,552)    1,243     (3,336)
   Redemption of preferred stock                               ---       ---     (1,000)
   Other equity transactions                                    72       627        (17)
                                                          --------  --------   --------
          Net cash provided by financing activities         18,530    12,967      3,415
                                                          --------  --------   --------
          Net (decrease) increase in cash                      555        31     (1,727)
Cash at beginning of period                                    210       179      1,906
                                                          --------  --------   --------
Cash at end of period                                     $    765  $    210   $    179
                                                          ========  ========   ========
Supplemental disclosure of cash flow information:
   Cash paid during the year for:
      Interest                                            $  1,839  $    680   $  2,853
                                                          ========  ========   ========
      Income taxes                                        $     59  $  1,295   $  2,508
                                                          ========  ========   ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                    Page 16

<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS



1.   THE COMPANY

Strouds, Inc. ( Strouds  or the  Company ), a Delaware corporation, is a
specialty retailer of bed, bath, tabletop and other home textiles products,
decorative accessories and other selected home furnishings.  At March 1, 1997,
the Company operated 67 stores in five states under the name Strouds.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis Of Presentation

The financial statements for the fiscal year 1994 include the accounts of the
Company and its wholly owned subsidiary.  All significant intercompany
accounts and transactions were eliminated in consolidation for that fiscal
year.  Effective April 2, 1995, the subsidiary was merged with and into the
Company.

Fiscal Year-Ended

The Company s fiscal year is based on a 52-53 week fiscal year ending on the
Saturday closest to the last day of February.  The fiscal years ended March 1,
1997 and February 25, 1995 included 52 weeks and the fiscal year ended March
2, 1996 included 53 weeks.

The Company has defined its fiscal year as the period in which most of the
activity occurs (e.g., the year ending March 1, 1997 is referred to as fiscal
1996).

Asset Impairment 

Effective March 3, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 ( SFAS No. 121 ),  Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of.   This statement
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.  Recoverability
of assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cashflows expected to be generated by the
asset.  If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
assets exceed the fair value of the assets.  Adoption of this standard
resulted in a charge of $1.8 million for fiscal 1996.  See note 4.

Stock Compensation

Effective March 3, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123 ( SFAS No. 123 ),  Accounting for Stock Based Compensation.  
As permitted under SFAS No. 123, the Company elected not to adopt the fair-
value based method of accounting for its stock based compensation plans, but
will account for such compensation under the provisions of Accounting
Principles Board Opinion No. 25,  Accounting for Stock Issued to Employees.  


                                    Page 17


<PAGE>
                                  STROUDS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)



2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company has, however, complied with the disclosure requirements of SFAS
No. 123, whereby the impact from recording the fair-values of the options
granted is presented on a proforma basis on net income (loss) and related per
share amounts.

Use Of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses.  Actual results could differ
from those estimates.

Inventories

Merchandise inventory is stated at the lower of cost (principally average
cost) or market as determined by the retail inventory method.  Included in
inventory costs for financial reporting purposes is the capitalization of
certain buying, warehousing, storage and transportation costs.  Capitalized 
costs in inventory at March 1, 1997 and March 2, 1996 were $1,701,000 and
$1,171,000 respectively.  See note 4.

Depreciation And Amortization

Depreciation and amortization are provided on a straight-line basis over the
following estimated useful lives:

     Furniture, fixtures and equipment        5 to 7 years
     Equipment held under capital leases      Term of the lease
     Leasehold improvements                   Term of the lease or life of
                                              the asset, whichever is shorter
                                              (generally 7 to 10 years)

Excess Of Cost Over Net Assets Acquired

Excess of cost over net assets acquired is amortized on a straight-line basis
over its estimated useful life of 40 years.  As part of an ongoing review and
evaluation of intangible assets, management assesses the carrying value of the
Company s intangible assets if facts and circumstances suggest that it may be
impaired.  If this review indicates that the intangibles will not be
recoverable, as determined by an undiscounted cash flow analysis over the
remaining amortization period, the carrying value would be reduced to
estimated fair market value.  Accumulated amortization amounted to $2,537,000
as of March 1, 1997 and $2,278,000 as of March 2, 1996.

Store Preopening Costs

Store preopening costs, consisting primarily of labor and supplies directly 


                                    Page 18

<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)



2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

related to the opening of specific stores, are expensed as incurred.  Total
preopening costs of $1,210,000, $456,000 and $516,000 were expensed in fiscal
1996, 1995 and 1994, respectively.

Income Taxes

The Company accounts for income taxes under the asset and liability method, 
whereby deferred income taxes are provided for the temporary differences
between the financial reporting basis and income tax basis of the Company s
assets and liabilities.  The effect on deferred taxes of a change in tax rates
is recognized in income in the period that includes the enactment date.

Net Income (Loss) Per Share

Net income (loss) per share is based on the weighted average number of common
and common equivalent shares outstanding.  Common stock equivalents, as
determined by the treasury stock method, represent shares which would be
issued assuming the exercise of common stock options and warrants reduced by
the number of shares which could be purchased with the proceeds from the
exercise of those options and warrants.  Common stock equivalents are not
included in the calculation of net income (loss) per share if their inclusion
would be anti-dilutive.

Fully diluted net income per share is not presented since the amounts do not
differ significantly from the primary net income per share presented.

Recently Issued Pronouncements

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ( SFAS) No. 128,  Earnings Per Share.   SFAS
No. 128 specifies new standards designed to improve the earnings per share
( EPS ) information provided in financial statements by simplifying the
existing computational guidelines, revising the disclosure requirements and
increasing the comparability of EPS data on an international basis.  Some of
the changes made to simplify the EPS computations include: (a) eliminating the
presentation of primary EPS and replacing it with basic EPS, with the
principal difference being that the common stock equivalents are not
considered in computing basic EPS, (b) eliminating the modified treasury stock
method and the three percent materiality provision and (c) revising the
contingent share provisions and the supplemental EPS data requirements.  SFAS
No. 128 also makes a number of changes to existing disclosure requirements. 
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods.  The Company estimates
that the implementation of SFAS No. 128 will not have a material impact on the
Company s financial statements.

Reclassifications

Certain reclassifications have been made to the fiscal 1995 and 1994 amounts
to conform to the fiscal 1996 presentation.


                                    Page 19


<PAGE>
                                STROUDS, INC.
                        NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)


3.   PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
                                                        March 1,    March 2,
     (IN THOUSANDS)                                       1997        1996
     ---------------------------------                  -------     ------- 
<S>                                                    <C>         <C>
     Furniture, fixtures and equipment                 $  42,346   $  30,915
     Equipment held under capital leases                   2,111       2,596
     Leasehold improvements                                7,308       5,687
                                                       ---------   ---------
                                                          51,765      39,198
     Impairment valuation reserve                         (1,800)        ---
     Accumulated depreciation and amortization           (24,857)    (20,992)
                                                       ---------   ---------
                                                       $  25,108   $  18,206
                                                       =========   =========
</TABLE>
4.   RESTRUCTURING AND ASSET IMPAIRMENT CHARGES

On  February 28, 1997, the Board of Directors approved a comprehensive
restructuring plan (the  Restructuring Plan ) which resulted in a pretax
charge of $16,250,000.  The Restructuring Plan is designed to improve the
operating performance of the Company through the closure or disposition of up
to 16 underperforming stores and implementing cost reduction measures,
including workforce reductions, to more closely align the Company s cost
structure with future expected revenues.

The Company recorded a pretax charge of $1,800,000 for the impairment of
certain operating assets.  The principal factors leading up to the charge were
current and future operating losses on individual operating assets,  whereby
the carrying value of  certain operating assets exceeded the current estimate
of future cash  flows from the related asset.

The restructuring and asset impairment charges consist of the following:
<TABLE>
<CAPTION>
                                                                    March 1,
     (IN THOUSANDS)                                                   1997
     ---------------------------------------------------------     --------
<S>                                                                <C>
     Occupancy, lease termination and lease subsidy costs
        associated with the closure or disposition of stores       $  7,400
     Asset write-down; merchandise inventory, leasehold
        improvements, furniture and fixtures and equipment            7,215
     Employee severance and other related costs                       1,635
                                                                   --------
        Total restructuring                                          16,250
     Asset impairment charges related to the adoption of SFAS 121     1,800
                                                                   --------
        Total restructuring and asset impairment                   $ 18,050
                                                                   ========
</TABLE>




                                    Page 20


<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)


5.   ACCRUED EXPENSES

Accrued expenses consist of the following:
<TABLE>
<CAPTION>
                                                        March 1,    March 2,
     (IN THOUSANDS)                                       1997        1996
     --------------------------------                   --------    --------
<S>                                                    <C>         <C>
     Compensation and related expense                  $   2,380   $   2,026
     Sales tax                                             1,667       1,298
     Other                                                 5,372       5,650
                                                       ---------   ---------
                                                       $   9,419   $   8,974
                                                       =========   =========
</TABLE>

6.   LONG-TERM DEBT

Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
                                                        March 1,   March 2,
     (IN THOUSANDS)                                       1997       1996
     ------------------------------------------------   --------   --------
<S>                                                     <C>        <C>
     Revolving promissory note payable to a financial
       institution, secured by inventory and the
       proceeds therefrom.  Interest is payable at
       the bank s prime rate or LIBOR plus 0.375% and
       2.250%, respectively (8.625% and 7.630% at
       March 1, 1997, respectively).  The borrowing
       limit is $40,000,000 not to exceed 60% of
       eligible inventory except, borrowings may be
       increased to 65% of eligible inventory for a
       period of 105 consecutive days commencing on
       January 1 each year.  The revolving promissory
       note expires on January 13, 2000 but may be
       extended for successive one year terms at the
       stated expiration date provided the Company is
       in compliance with all of its covenants          $ 29,887   $    ---
     Revolving promissory note payable to financial
       institution, repaid during the year ended
       March 1, 1997                                         ---     12,400
     Promissory note payable to a financial institution,
       secured by equipment, fixtures and leasehold
       improvements at two store locations. Interest is
       payable at the rate of 9.580% per annum.  The
       promissory note is for five years, payable in
       monthly installments beginning September 1, 1996    2,760        ---
     Capital lease obligations payable in varying monthly
       installments through the end of fiscal 1997, with
       interest rates ranging from 8.0% to 11.5%.  Leases 
       are secured by the underlying equipment                46        283
                                                        --------   --------
         Total debt                                       32,693     12,683
     Less current maturities                                (561)      (237)
                                                        --------   --------
         Total long-term debt                           $ 32,132   $ 12,446
                                                        ========   ========
</TABLE>
                                    Page 21

<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)


6.   LONG-TERM DEBT (CONTINUED)

Scheduled maturities for total debt outstanding at March 1, 1997 are as
follows:
<TABLE>
<CAPTION>
     (IN THOUSANDS)            Notes payable    Capital leases     Total
     -------------             -------------    --------------    -------
<S>                              <C>               <C>            <C>
     Fiscal year:
       1997                      $   515           $    46        $   561
       1998                          567               ---            567
       1999                       30,511               ---         30,511
       2000                          686               ---            686
       2001                          368               ---            368
                                 -------           -------        -------
                                 $32,647           $    46        $32,693
                                 =======           =======        =======
</TABLE>
The Company s revolving promissory note (the  Credit Facility ) contains
various restrictions on the payment of cash dividends, incurrence of
additional indebtedness, acquisitions, capital expenditures, investments and
disposition of assets.  The covenants also require the Company to meet certain
net income levels, as defined, determined at the end of each fiscal quarter on
a fiscal year-to-date basis.  As of March 1, 1997, the Company was in breach
of its net income covenant.  The provider of the Credit Facility has waived
that requirement as of March 1, 1997.

Included in the Credit Facility is a $6.0 million letter of credit sub-
facility.  At March 1, 1997, the Company had letters of credit amounting to 
$364,000 outstanding for purchases from foreign vendors under this sub-
facility.

On March 6, 1996, the Company entered into an International Swap Dealers
Association Master Agreement (the  Agreement ) with the provider of its
previous borrowing facility and, who is affiliated with the current provider
of the Company s Credit Facility.  The Agreement was entered into for the
purpose of converting a portion of its borrowings to a long-term fixed base
rate of interest.  On April 5, 1996 and November 26, 1996, the Company
converted $10 million and $10 million, respectively, to a weighted average
fixed base interest rate of 7.00% plus 2.25% until this Agreement expires on
April 6, 1999.

On May 29, 1997, the Company and the provider of its Credit Facility agreed to
amend certain terms and conditions of the Credit Facility.  Under the amended
terms and conditions, the Company's covenants will be reset to be reflective
of the Company's anticipated earnings, capital expenditures and cash flow over
the remaining term of the Credit Facility.  Borrowings may not exceed 65% of
eligible inventory through August 31, 1998 and 60% thereafter except,
borrowings may be increased to 65% for 120 consecutive days commencing April
1, 1999.  Interest will be payable at the provider's prime rate plus 1.125% or
LIBOR plus 3.25%.  Commencing with the fiscal year beginning March 1, 1998,
the Company can lower its interest rate spread up to a maximum of 1.00%
provided it achieves certain specified earnings targets measured on a


                                    Page 22

<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)



6.   LONG-TERM DEBT (CONTINUED)

quarterly year-to-date basis.  In addition, the Company has also agreed to
provide all of its unencumbered fixed assets as additional security to the
Credit Facility.



7.   LEASE COMMITMENTS

At March 1, 1997, the Company occupied all of its facilities under operating
leases.  The leases require minimum and percentage rental payments based on
gross sales and provide that the Company pay property taxes and costs arising
from the Company s use of the leased property.  The leases are primarily for
ten-year periods, and certain leases contain renewal options.  For lease
agreements with scheduled rent increases during the lease term or for rental
payments commencing on a date other than the initial occupancy, rental expense
is recognized from the date of occupancy on a straight-line basis over the
lease term.  Total rental expense amounted to $20,806,000, $16,313,000 and
$13,484,000 (inclusive of percentage rentals of $3,000, $24,000 and $101,000)
for fiscal 1996, 1995 and 1994, respectively.

The Company has operating leases for equipment.  These leases are for three to
five year periods, and certain leases contain renewal options.  The rental
expense amounted to $710,000, $565,000 and $814,000 for fiscal 1996, 1995 and
1994 respectively.

Minimum rental commitments under all operating leases are as follows:
<TABLE>
<CAPTION>
     (IN THOUSANDS)
     --------------
<S>                                 <C>
     Fiscal year:
       1997                         $  19,425
       1998                            18,924
       1999                            17,601
       2000                            15,906
       2001                            13,323
       Thereafter                      57,052
                                    ---------
                                    $ 142,231
                                    =========
</TABLE>











                                    Page 23

<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)



8.   INCOME TAXES

The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
                                                 March 1, March 2, February 25,
  (IN THOUSANDS)                                  1997      1996      1995
  --------------                                --------   -------  --------
<S>                                              <C>       <C>       <C>
  Current:
    Federal                                      $(2,488)  $ 1,107   $ 2,068
    State                                            ---       388       596
                                                 -------   -------   -------
      Total current income tax expense (benefit)  (2,488)    1,495     2,664
                                                 -------   -------   -------
  Deferred:
    Federal                                          ---       247      (106)
    State                                            ---         6       (61)
                                                 -------   -------   -------
      Total deferred income tax expense (benefit)    ---       253      (167)
                                                 -------   -------   -------
      Net income tax expense (benefit)           $(2,488)  $ 1,748    $2,497
                                                 =======   =======   =======
</TABLE>


A summary of the deferred tax assets (liabilities) is as follows:
<TABLE>
<CAPTION>
                                          March 1,        March 2,
     (IN THOUSANDS)                         1997            1996
     -------------------                  --------        --------
<S>                                       <C>              <C>
     Deferred tax assets:
       Inventory                          $   484          $    90
       Cash versus accrual basis            9,467              826
       State taxes                            ---              136
                                          -------          -------
                                            9,951            1,052
       Valuation allowance                 (8,275)             ---
                                          -------          -------
         Total deferred tax assets          1,676            1,052

     Deferred tax liabilities:
       Property and equipment                (624)            (147)
       Capital equipment held on lease         (5)              (2)
                                          -------          -------
          Total deferred tax liabilities     (629)            (149)
                                          -------          -------
             Net deferred tax assets      $ 1,047          $   903
                                          =======          =======
</TABLE>




                                    Page 24

<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)



8.   INCOME TAXES (CONTINUED)

The reconciliation of the Federal statutory rate and the effective tax rate is
as follows:
<TABLE>
<CAPTION>
                                            March 1,  March 2,  February 25,
                                              1997      1996        1995
                                            --------  --------  ------------
<S>                                           <C>       <C>         <C>
     Federal statutory rate                   35.0%     35.0%       35.0%
     Use of net operating loss carryback      10.2%      ---         ---
     State tax, net of Federal
       tax benefit                             ---       6.1         6.1
     Exercise of non-qualified
       stock options                           ---      (3.7)        ---
     Amortization of excess of cost
       over net assets acquired                0.4       2.4         2.0
     Net operating loss valuation allowance  (33.8)      ---         ---
     Officers  life insurance                  ---       0.1         0.1
     Other                                    (1.6)      0.6         2.1
                                            -------   -------     -------
                                              10.2%     40.5%       45.3%
                                            =======   =======     =======
</TABLE>

The income tax receivable at March 1, 1997 represents the expected tax refund
from the carryback of the current year tax loss to prior years.



9.   STOCKHOLDERS  EQUITY

On November 17, 1995, the Board of Directors declared a dividend of one
preferred stock purchase right (the  Rights ) for each share of common stock,
$0.0001 per share (the  Common Shares ), of the Company outstanding at the
close of business on November 30, 1995.  Each Right will entitle the
registered holder thereof, after the Rights become exercisable and until
November 17, 2005 (or the earlier redemption, exchange or termination of the
Rights), to purchase from the Company on one-hundredth of a share of Series B
Junior Participating Preferred Stock, par value $0.0001 per share, at a price
of $30.00 per one one-hundredth of a Preferred Share, subject to certain anti-
dilution adjustments.  The Rights also, under certain conditions, entitle the
holders to purchase $60.00 worth of Common Shares for $30.00. The Rights
expire on November 17, 2005, unless the Company decides to redeem them earlier
at $0.01 per Right or upon the occurrence of certain events.

The Rights will not be exercisable or transferable apart from the Common
Shares until the earlier to occur of (i) the 10th day after a public
announcement that a Person (broadly defined as any individual or other entity)
or group of affiliated or associated Persons has become an Acquiring Person (a
Person or group of affiliated or associated Persons who has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the


                                    Page 25

<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)



9.   STOCKHOLDERS  EQUITY (CONTINUED)

Common Shares), or (ii) the 10th day after a Person or group commences, or
announces an intention to commence, a tender or exchange offer, the
consummation of which would result in the beneficial ownership by a Person or
group of 15% or more of the Common Shares.

No event during fiscal 1996 made the Rights exercisable.

In October 1994, Strouds completed an initial public offering of 3,200,000
shares of Common Stock.  Of the $36,184,000 net proceeds of this offering,
$14,752,000 was used to repay in full a 12% promissory note due August 30,
1996 held by BT Capital, a major stockholder of the Company, $12,669,000 was
used to repay the Company s revolving promissory note, $3,000,000 was used to
repay the 10% interest promissory notes due August 30, 1996 payable to
stockholders of the Company, and $1,000,000 was used to redeem in full all
10,000 outstanding shares of the Company s Series A Redeemable Preferred Stock
at a redemption price equal to the liquidation preference of $100 per share,
plus aggregate accrued but unpaid dividends of $32,000.

On July 26, 1994, the Company effected a 43-for-1 stock split by an amendment
to its certificate of incorporation which had been approved by the Board of
Directors and the Stockholders.  The amendment also changed par value from
$0.01 per share to $0.0001, and increased authorized common stock from 200,000
shares to 25,000,000 shares.  All references in the financial statements to
numbers of shares and related prices, per share amounts and option plan data
have been restated to reflect the split.

The Company has issued 1,025,077 warrants to purchase shares of common stock
related to a prior year s financing arrangement.  The warrants are exercisable
at any time at the exercise price of $0.0002 per share.  Such warrants to
purchase 788,147 shares of common stock were exercised during fiscal 1994.  As
of March 1, 1997, warrants to purchase 212,850 shares of common stock were
outstanding.



10.   EMPLOYEE BENEFITS

Strouds sponsors the Strouds Profit Sharing and Retirement Plan (the  Plan ),
a qualified plan under Section 401(k) of the Internal Revenue Code of 1986, as
amended.  The Plan covers substantially all full-time employees and provides
for Company matching of employee contributions, at the discretion of the Board
of Directors, up to 3% of each employee s salary.  Matching contributions
totaled $141,000, $149,000 and $83,000 for fiscal 1996, 1995 and 1994,
respectively.

On May 19, 1994, the Company s Board of Directors adopted the 1994 Equity
Participation Plan ( 1994 Plan ) to attract and retain directors, officers and
key employees.  The 1994 Plan authorizes the Compensation Committee of the
Board of Directors to issue 850,000 shares of Common Stock upon exercise of


                                    Page 26


<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)




10.   EMPLOYEE BENEFITS (CONTINUED)

options, stock appreciation rights, and other awards, or as restricted or
deferred stock awards.  Under this plan, 155,766 shares are available to be
granted.  The exercise price of the non-qualified stock options awarded under
the 1994 Plan is determined by the Compensation Committee and can be less than
fair market value but not less than par value ($0.0001).  The Compensation
Committee can determine the period of exercisability and the vesting schedule;
however, the life of the option is limited to ten years from the date of
grant.

There were 60,875 options outstanding at March 1, 1997 related to the Stock
Option Plan for Executives and Key Employees (the  1988 Plan ).  The 1988 Plan
was amended to prohibit the issuance of any additional options after September
1, 1994.

Information with respect to the Company's option plans is summarized as
follows:
<TABLE>
<CAPTION>
                                 March 1,              March 2,       February 25,
                                   1997                  1996            1995 
                             ----------------   -------------------   ------------
                                     Weighted-             Weighted-
                                     average               average
                                     exercise              exercise
                            Shares   price       Shares    price       Shares
                            ------   --------    ------    --------    ------
<S>                        <C>       <C>        <C>        <C>         <C>
     Outstanding at 
        beginning of year  627,759   $7.54       652,362   $6.66       355,050
     Granted               172,300    4.95       343,868    6.42       311,850
     Exercised               ---       --       (171,407)   3.20       (10,238)
     Cancelled             (44,950)   5.71      (197,064)   6.42        (4,300)
                           -------   -----       -------   -----       -------
     Outstanding at 
        end of year        755,109   $7.06       627,759   $7.54       652,362
                           =======   =====       =======   =====       =======

     Exercisable at
        end of year        261,878               183,455               291,217
                           =======               =======               =======

     Weighted-average fair
        value of options
        granted during
        the year             $3.13                 $4.02
                             =====                 =====
</TABLE>





                                      Page 27


<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)



10.   EMPLOYEE BENEFITS (CONTINUED)

The following table summarizes information about the stock options outstanding
at March 1, 1997:
<TABLE>
<CAPTION>
                               Options Outstanding          Options Exercisable
                       ----------------------------------  ---------------------
                                    Weighted-    Weighted-              Weighted-
                       Number       average      average   Number       average
     Range of          outstanding  contractual  exercise  exercisable  exercise
     exercise prices   at 03/01/97  life         price     at 03/01/97  price
     ----------------  -----------  -----------  --------  -----------  --------
<S>                    <C>          <C>          <C>       <C>          <C>
     $ 3.13 to $ 4.75    180,000       8.90       $ 4.23     88,726      $ 4.25
     $ 5.31 to $ 5.75    154,875       7.11       $ 5.39     35,875      $ 5.62
     $ 7.38 to $ 8.38    238,984       7.64       $ 7.99     62.777      $ 8.06
     $ 9.77 to $ 9.77    161,250       7.24       $ 9.77     64,500      $ 9.77
     $12.50 to $12.50     20,000       7.63       $12.50     10,000      $12.50
     ----------------  -----------  -----------  --------  -----------  --------
     $ 3.13 to $12.50    755,109       7.75       $ 7.06    261,878      $ 7.03
     ================  ===========  ===========  ========  ===========  ========
</TABLE>
Additionally, on September 1, 1994, the Company s Board of Directors adopted
the 1994 Employee Qualified Stock Purchase Plan (the  Purchase Plan ).  The
purpose of the Purchase Plan is to enable the Company to grant options to
employees to buy shares of its Common Stock, at a 15% discount from the then
fair market value without commissions and other charges, to attract and retain
experienced and capable employees and to help employees to further identify
their interests with those of the Company s stockholders generally.  The
Purchase Plan is intended to qualify as an  employee stock purchase plan,  as
defined in Section 423(b) of the Code.  An aggregate of 250,000 shares of
Common Stock has been reserved for issuance under the Purchase Plan, subject
to adjustment for stock splits, stock dividends and similar events.  In fiscal
1996, the Company issued 23,753 shares under the Purchase Plan.

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123).  Accordingly, no compensation cost has been
recognized for the stock option or stock purchase plans.  Had compensation
cost for the Company's 1996 and 1995 plans been determined consistent with
SFAS No. 123, the Company's net income and net income per share for 1996 and
1995 would approximate the proforma amounts below:
<TABLE>
<CAPTION>
                                                     March 1,     March 2,
     (IN THOUSANDS, EXCEPT PER SHARE DATA)             1997         1996
     -------------------------------------           ---------    ---------
<S>                                <C>              <C>           <C>
     Net (loss) income             As reported      $ (21,968)    $  2,570
     Net (loss) income             Proforma         $ (22,403)    $  2,277

     Net (loss) income per share   As reported      $   (2.58)    $   0.30
     Net (loss) income per share   Proforma         $   (2.63)    $   0.26

</TABLE>


                                    Page 28



<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)



10.   EMPLOYEE BENEFITS (CONTINUED)


The effects of applying SFAS No. 123 in this pro-forma disclosure are not
necessarily indicative of future amounts.  

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model using the following weighted-average
assumptions:
<TABLE>
<CAPTION>
     Weighted-average assumptions         March 1, 1997       March 2, 1996
     ----------------------------         -------------       -------------
<S>                                           <C>                 <C>
     Risk-free interest rate                  6.0%                5.8%
     Expected volatility                       45%                 45%
     Expected dividend yield                    0%                  0%
     Expected life (years)                      9                   9
</TABLE>


11.  RELATED PARTY TRANSACTIONS

Wilfred C. Stroud, Chairman of the Board and President of the Company, and his
spouse are beneficial owners of 45% of the stock of Reflections Fine Bedding
Attire, Inc. ( Reflections ).  Wayne P. Selness, former President and Chief
Executive Officer of the Company, and his spouse are beneficial owners of 10%
of the stock of Reflections.  On June 1, 1993, an entity unaffiliated with
Reflections or Strouds, acquired substantially all of the assets and business
of Reflections.

As part of the foregoing acquisition, Mr. Stroud entered into a Non-
Competition and Consulting Agreement, dated June 1, 1993, with the purchaser
of the Reflections business.  Pursuant to such agreement, Mr. Stroud is
entitled to receive an amount based on a percentage of the Reflections 
business gross sales, up to a maximum total payment of $825,000.  During the
contract year ended May 31, 1996, the Reflections  business sales totaled
$4,170,000, of which $1,341,000 were sales to the Company.  Mr. Stroud
received a payment of $103,000 from the Reflections business with respect to
that year.














                                    Page 29



<PAGE>
                                STROUDS, INC.
                       NOTES TO FINANCIAL STATEMENTS
                                 (CONTINUED)



12.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The results of operations for fiscal 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
                                        First    Second     Third    Fourth
(IN THOUSANDS, EXCEPT PER SHARE DATA)  Quarter   Quarter   Quarter   Quarter
-------------------------------------  -------   -------   -------   -------
<S>                                    <C>       <C>       <C>       <C>
FISCAL 1996:
     Net sales                         $46,436   $49,516   $54,984   $58,842
     Gross profit                       13,676    14,105    15,923    15,449
     Operating loss                      1,138        35     1,813    20,132
     Net loss                              678       337     1,578    19,375
     Net loss per share                   0.08      0.04      0.18      2.28

FISCAL 1995:
     Net sales                         $42,973   $42,889   $48,666   $55,788
     Gross profit                       13,469    12,958    15,212    17,500
     Operating income                      598       403     1,167     2,536
     Net income                            275       161       669     1,465
     Net income per share                 0.03      0.02      0.08      0.17

</TABLE>






























                                    Page 30


<PAGE>
                        INDEPENDENT AUDITORS  REPORT


The Board of Directors
Strouds, Inc.:

     We have audited the accompanying balance sheets of Strouds, Inc. as of
March 1, 1997 and March 2, 1996 and the related statements of operations,
stockholders  equity and cash flows for each of the years in the three-year
period ended March 1, 1997.  These financial statements are the responsibility
of the Company s management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Strouds, Inc. as
of March 1, 1997 and March 2, 1996 and the results of its operations and its
cash flows for each of the years in the three-year period ended March 1, 1997
in conformity with generally accepted accounting principles.

     As discussed in note 2 to the financial statements, effective March 3,
1996, Strouds, Inc. adopted the provisions of Statements of Financial
Accounting Standards No. 121,  Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. 



/s/  KPMG Peat Marwick LLP
Los Angeles, California
April 9, 1997, except for the
   last paragraph of note 6, which is
   as of May 29, 1997.

















                                    Page 31


<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                                STROUDS, INC.
                                (Registrant)


                                /s/Wilfred C. Stroud
                                --------------------
                                Wilfred C. Stroud
                                 Director, Chairman of the Board and President

Dated:  June 4, 1997











































                                    Page 32