<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                   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 May 5, 2001
                                                 -----------
                                       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             0-21406                           .
                            ----------------------------------------------

                                Brookstone, Inc.                          .
     ---------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                               06-1182895
          --------                                               ----------
(State or other jurisdiction                                  (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                     17 Riverside Street, Nashua, NH  03062
                     --------------------------------------
               (address of principal executive offices, zip code)

                                  603-880-9500
                                  ------------
              (Registrant's telephone number, including area code)

     _____________________________________________________________________
   (Former name, former address and former fiscal year, if changed since last
                                    report)

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
     ---      ___


               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes __________   No __________

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 8,367,470 shares of common
stock as of June 11, 2001.
<PAGE>

                                BROOKSTONE, INC.

                               Index to Form 10-Q

Part I:  Financial Information                                    Page No.
         ---------------------                                    --------

Item 1:
          Consolidated Balance Sheet
           as of May 5, 2001, February 3, 2001 and April 29, 2000     3

          Consolidated Statement of Operations for the thirteen
           weeks ended May 5, 2001 and April 29, 2000                 4

          Consolidated Statement of Cash Flows for the thirteen
           weeks ended May 5, 2001 and April 29, 2000                 5

          Notes to Consolidated Financial Statements                  6

Item 2:
          Management's Discussion and Analysis of Financial
           Condition and Results of Operations                        8

Part II:  Other Information
          -----------------

Item 1:
          Legal Proceedings                                           10

Item 2:
          Change in Securities                                        10

Item 3:
          Defaults by the Company upon its Senior Securities          10

Item 4:
          Submission of Matters to a Vote of Security Holders         10

Item 5:
          Other Information                                           10

Item 6:
          Exhibits and Reports on Form 8-K                            10

Signatures                                                            11

                                       2
<PAGE>

                                BROOKSTONE, INC.
                           CONSOLIDATED BALANCE SHEET
                       (In thousands, except share data)


<TABLE>
<CAPTION>
                                                       (Unaudited)                                       (Unaudited)
                                                       May 5, 2001           February 3, 2001          April 29, 2000
                                                       -----------           ----------------          --------------
Assets
------
<S>                                                    <C>                    <C>                      <C>
Current assets:
    Cash and cash equivalents                           $  3,774                $ 35,397                  $  1,600
    Receivables, net                                       4,686                   7,477                     4,915
    Merchandise inventories                               64,314                  55,059                    52,668
    Deferred income taxes, net                             7,054                   3,633                     5,694
    Other current assets                                   5,453                   4,030                     4,741
                                                ----------------        ----------------          ----------------
        Total current assets                              85,281                 105,596                    69,618

Deferred income taxes, net                                 3,662                   3,662                     3,806
Property and equipment, net                               42,160                  41,956                    41,265
Intangible assets, net                                     5,222                   5,359                     5,769
Other assets                                               2,365                   2,595                     1,632
                                                ----------------        ----------------          ----------------
                                                        $138,690                $159,168                  $122,090
                                                ================        ================          ================

Liabilities and Shareholders' Equity
------------------------------------

Current liabilities:
    Accounts payable                                    $ 12,304                $ 13,522                  $ 12,543
    Other current liabilities                             14,562                  28,966                    13,815
                                                ----------------        ----------------          ----------------

         Total current liabilities                        26,866                  42,488                    26,358

Other long-term liabilities                               11,896                  11,755                    10,902
Long-term obligation under capital lease                   2,387                   2,414                     2,484

Commitments and contingencies

Shareholders' equity:
Preferred stock, $0.001 par value: Authorized -
 2,000,000 shares; issued and outstanding - 0
 shares at May 5, 2001, February 3, 2001 and
 April 29, 2000
Common stock, $0.001 par value: Authorized
 50,000,000 shares; issued and outstanding-
 8,355,033 shares at May 5, 2001, 8,320,640
 shares at February 3, 2001 and 8,304,140
 shares at April 29, 2000                                      8                       8                         8
Additional paid-in capital                                50,500                  50,277                    50,046
Retained earnings                                         47,080                  52,273                    32,339
Treasury stock, at cost - 3,616 shares at May
 5, 2001, February 3, 2001 and April 29, 2000                (47)                    (47)                      (47)
                                                ----------------        ----------------          -----------------
          Total shareholders' equity                      97,541                 102,511                    82,346
                                                ----------------        ----------------          -----------------

                                                        $138,690                $159,168                  $122,090
                                                ================        ================          ================
</TABLE>

Note: The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>

                                BROOKSTONE, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                     (In thousands, except per share data)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                 Thirteen-weeks Ended
                                                           -------------------------------
                                                           May 5, 2001      April 29, 2000
                                                           -----------      --------------
<S>                                                     <C>                 <C>
Net sales                                                  $     54,997        $    51,077

Cost of sales                                                    40,841             37,407
                                                           ------------        -----------
Gross profit                                                     14,156             13,670

Selling, general and administrative
expenses                                                         22,648             21,308
                                                           ------------        -----------
Loss from operations                                             (8,492)            (7,638)

Interest income, net                                                (61)               (37)
                                                           ------------        -----------
Loss before taxes and
cumulative effect of accounting change                           (8,431)            (7,601)

Income tax benefit                                               (3,238)            (2,919)

                                                           ------------        -----------
    Loss before cumulative effect of accounting change           (5,193)            (4,682)

Cumulative effect of accounting change                              ---               (308)
                                                           ------------        -----------

Net loss                                                   $     (5,193)       $    (4,990)
                                                           ============        ===========
Basic / diluted loss per share:
------------------------------
Loss before cumulative effect of accounting change         $      (0.62)       $     (0.56)
Cumulative effect of accounting change                              ---              (0.04)
                                                           ------------        -----------
Net loss                                                   $      (0.62)       $     (0.60)
                                                           ============        ===========

Weighted average shares outstanding basic / diluted               8,336              8,299
                                                           ============        ===========
</TABLE>

Note: The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>

                                BROOKSTONE, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (In thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>


                                                                                      Thirteen-weeks Ended
                                                                             ---------------------------------------
                                                                                     May 5, 2001      April 29, 2000
                                                                             -------------------      --------------
<S>                                                                          <C>                    <C>
Cash flows from operating activities:
Net loss                                                                      $   (5,193)           $   (4,990)

 Adjustments to reconcile net loss to net cash used for operating
  activities:

  Depreciation and amortization                                                    2,551                 2,510
  Amortization of debt issuance costs                                                 40                    36
  Deferred income taxes, net                                                      (3,421)               (3,133)
  Related tax benefits on exercise of stock options                                  183                    22
  (Increase) Decrease in other assets                                                190                  (134)
  Increase in other long-term liabilities                                            141                   106

Changes in working capital:
   Accounts receivable, net                                                        2,791                   510
   Merchandise inventories                                                        (9,255)               (9,029)
   Other current assets                                                           (1,423)                 (169)
   Accounts payable                                                               (1,218)               (3,216)
   Other current liabilities                                                     (14,404)              (11,715)
                                                                             -----------            ----------

Net cash used for operating activities                                           (29,018)              (29,202)

Cash flows from investing activities:
   Expenditures for property and equipment                                        (2,618)                 (564)

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

Net cash used for investing activities                                            (2,618)                 (564)

Cash flows from financing activities:
   Payments for capitalized lease                                                    (27)                  (27)
   Proceeds from exercise of stock options                                            40                     4
                                                                             -----------            ----------

Net cash provided by (used for) financing activities                                  13                   (23)
                                                                             -----------            ----------
Net decrease in cash and cash equivalents                                        (31,623)              (29,789)

Cash and cash equivalents at beginning of period                                  35,397                31,389
                                                                             -----------            ----------
Cash and cash equivalents at end of period                                    $    3,774            $    1,600
                                                                             ===========            ==========
</TABLE>



Note: The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>

                                BROOKSTONE, INC.

                   Notes to Consolidated Financial Statements

1.   The results of the thirteen-week period ended May 5, 2001 are not
     necessarily indicative of the results for the full fiscal year. The
     Company's business, like the business of retailers in general, is subject
     to seasonal influences. Historically, the Company's fourth fiscal quarter,
     which includes the winter holiday selling season, has produced a
     disproportionate amount of the Company's net sales and substantially all of
     its income from operations. The Company expects that its business will
     continue to be subject to such seasonal influences.

2.   During the fourth quarter of Fiscal 2000, the Company changed its revenue
     recognition policy for catalog sales and other drop shipment sales in
     accordance with Securities and Exchange Commission's Staff Accounting
     Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
     Statements". Under the provisions of SAB 101, revenue on catalog sales is
     recognized at time of customer receipt instead of at time of shipment, as
     the company retains risk of loss while the goods are in transit. The
     cumulative effect of this change for periods prior to Fiscal 2000 was
     $308,000, net of tax benefit of $193,000, and has been reflected in the
     Company's thirteen-week period ended April 29, 2000.

3.   In the fourth quarter of Fiscal 2000, the Company changed its income
     statement classification of shipping and handling fees and costs in
     accordance with the Emerging Issues Task Force 2000-10, "Shipping and
     Handling Fees and Costs" ("EITF 00-10"). As a result of this adoption of
     EITF 00-10, the Company now reflects shipping and handling fees billed to
     customers as revenue while the related shipping and handling costs are
     included in cost of goods sold. Prior to the adoption of EITF 00-10 such
     fees and costs were netted in selling, general and administrative expenses.
     Shipping and handling fees and costs for all prior periods presented have
     been classified to conform to the new income statement presentation.

4.   The accompanying unaudited consolidated financial statements have been
     prepared in accordance with generally accepted accounting principles and
     practices consistently applied.  In the opinion of the Company, these
     financial statements contain all adjustments (consisting of only normal
     recurring adjustments) necessary to present fairly the financial position
     and the results of operations for the periods reported. Certain information
     and footnote disclosures normally included in financial statements
     presented in accordance with generally accepted accounting principles have
     been condensed or omitted. It is suggested that the accompanying
     consolidated financial statements be read in conjunction with the annual
     financial statements and notes thereto which may be found in the Company's
     Fiscal 2000 annual report.

5.   Certain reclassifications have been made to the thirteen-week periods ended
     April 29, 2000 to conform to the current year presentation.

6.   The exercise of stock options, which have been granted under the Company's
     stock option plans, gives rise to compensation, which is includable in the
     taxable income of the optionees and deductible by the Company for tax
     purposes upon exercise. Such compensation reflects an increase in the fair
     market value of the Company's common stock subsequent to the date of grant.
     For financial reporting purposes, the tax effect of this deduction is
     accounted for as a credit to additional paid-in capital rather than as a
     reduction of income tax expense. Such exercises resulted in a tax benefit
     of approximately $183 thousand  for the thirteen-week period ended May 5,
     2001.

7.   Business conducted by the Company can be segmented into two distinct areas
     determined by the method of distribution channel.  The retail segment is
     comprised of all full-year stores in addition to all temporary stores and
     kiosks.  Retail product distribution is conducted directly through the
     store location.  The direct marketing segment is comprised of the Hard-to-
     Find Tools, Brookstone Gift Collection and Gardeners Eden catalogs and the
     Internet site www.Brookstone.com.  Direct marketing product distribution is
                   ------------------
     conducted through the Company's direct marketing call center and
     distribution facility located in Mexico, Missouri or by the Company's
     vendors.  Both segments of the Company sell similar products, although not
     all Company products are fully available within both segments.

     All costs directly attributable to the direct marketing segment are charged
     accordingly while all remaining operating costs are charged to the retail
     segment.  The Company's management does not review assets by segment.

                                       6
<PAGE>

The tables below disclose segment net sales and pre-tax loss for the thirteen-
week period ended May 5, 2001 and April 29, 2000 (in thousands).

<TABLE>
<CAPTION>
Thirteen-weeks:                      Net Sales                    Pre-tax Loss
                        -------------------------------- ------------------------------
                           May 5, 2001    April 29, 2000    May 5, 2001  April 29, 2000
                        -------------- ----------------- -------------- ---------------
<S>                     <C>            <C>               <C>            <C>
Reportable segment:
Retail                    $    44,318    $       40,862    $    (7,226)   $     (6,230)
Direct Marketing               10,679            10,215         (1,266)         (1,408)

Reconciling items:
   Interest expense               ---               ---           (291)           (317)
   Interest income                ---               ---            352             354
                        -------------- ----------------- -------------- ---------------
Consolidated:             $    54,997    $       51,077    $    (8,431)   $     (7,601)
                        ============== ================= ============== ===============
</TABLE>



7.      Basic and diluted earnings per share (EPS) were calculated for the
        thirteen-week period ended May 5, 2001 and April 29, 2000 as follows:



                                               Thirteen-weeks Ended
                                        -----------------------------------
                                            May 5, 2001      April 29, 2000
                                        ---------------  ------------------

    Net loss                                   $(5,193)           $(4,990)

    Weighted average number of
     common shares outstanding
                                                 8,336              8,299


    Effect of dilutive securities:
     Stock options                                 ---                ---
                                        ---------------  -----------------
    Weighted average number of
    common shares as adjusted                    8,336              8,299
                                        ===============  =================


    Net loss per share -
    basic/diluted                              $ (0.62)           $ (0.60)
                                        ===============  =================

        For the thirteen-week period ended May 5, 2001, antidilutive shares of
        533,724 were excluded from the computations of diluted earnings per
        share. For the thirteen-week period ended April 29, 2000, antidilutive
        shares 242,539 were excluded from the computations of diluted earnings
        per share.

                                       7
<PAGE>

                               BROOKSTONE, INC.

                    Management's Discussion and Analysis of
               Financial Condition and Results of Operations for
                  the Thirteen-week Period Ended May 5, 2001


Results of Operations
---------------------

     For the thirteen-week period ended May 5, 2001, net sales increased 7.7%
over the comparable period last year. Comparable store sales for the thirteen-
week period increased 1.7%. The retail sales increase for the thirteen-week
period of 8.5% reflected the results of opening 16 new stores subsequent to the
first quarter of Fiscal 2000, two of which opened during Fiscal 2001, offset by
the closing of two stores in Fiscal 2000. The total number of stores open at the
end of the thirteen-week period ended May 5, 2001 was 225 versus 211 at the end
of the comparable period in Fiscal 2000. Direct marketing sales for the
thirteen-week period ended May 5, 2001 increased approximately 4.5% when
compared to the thirteen-week period ended April 29, 2000, primarily as a result
of increased circulation of 6%.

     For the thirteen-week period ended May 5, 2001, gross profit as a
percentage of net sales was 25.7% versus 26.8% for the comparable period last
year. The decrease in the gross profit percentage for the thirteen-week period
was principally related to strong sales of lower margin products during the
first quarter of Fiscal 2001 as compared to the first quarter of Fiscal 2000.

     Selling, general and administrative expenses as a percentage of net sales
for the thirteen-week period ended May 5, 2001 were 41.2% versus 41.7% for the
comparable period last year. The thirteen-week decrease in percentage was
primarily a result of good expense control and leveraging the base expenses.

     Net interest income for the thirteen-week period ended May 5, 2001 was $61
thousand compared to $37 thousand during the comparable period last year.

     As a result of the foregoing, the Company reported a net loss of $5.2
million, or $0.62 per basic and diluted share, for the thirteen-week period
ended May 5, 2001, as compared to a $5.0 million net loss, or $0.60 per basic
and diluted share (after reflecting the reduction of the cumulative effect of
accounting change of $0.04), for the comparable period last year.

Accounting Principle Change
---------------------------

     During the fourth quarter of Fiscal 2000, the Company changed its revenue
recognition policy for catalog sales and other drop shipment sales in accordance
with Securities and Exchange Commission's Staff Accounting Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements". Under the provisions
of SAB 101, revenue on catalog sales is recognized at time of customer receipt
instead of at time of shipment, as the company retains risk of loss while the
goods are in transit. The cumulative effect of this change for periods prior to
Fiscal 2000 was $308,000, net of tax benefit of $193,000, and has been reflected
in the Company's thirteen-week period ended April 29, 2000.


Financial Condition
-------------------

     For the thirteen-week period ended May 5, 2001, net cash used by operating
activities totaled $29 million, primarily as a result of the net loss, the
purchase of inventory and the payment of income taxes. Cash used for investment
activities during the first thirteen-weeks of Fiscal 2001, representing the
purchase of property and equipment, amounted to $2.6 million. Cash from
financing activities during the thirteen-week period of Fiscal 2001 amounted to
$13 thousand, acquired primarily through the exercise of stock options,
partially offset by capitalized lease payments.

     For the thirteen-week period ended April 29, 2000, net cash used by
operating activities totaled $29 million, reflecting primarily the net loss,
the purchase of inventory and the payment of income taxes.

                                       8
<PAGE>

Cash used for investment activities during the thirteen-week period of Fiscal
2000, representing the purchase of property and equipment amounted to $564
thousand. Cash used for financing activities during the thirteen-week period of
Fiscal 2000 amounted to $23 thousand primarily as a result of capitalized lease
payments.

     Merchandise inventories were $64.3 million at May 5, 2001 compared to $55.1
million at February 3, 2001. This higher inventory level is related to inventory
purchases for the second quarter Father's Day selling period. The accounts
payable balance was $12.3 million at May 5, 2001 compared to $13.5 million at
February 3, 2001.

    The Company's capital expenditures for the thirteen-week period ended May 5,
2001 were principally related to the opening of two stores and construction
related to stores anticipated to open in the upcoming fiscal quarter. The
Company anticipates opening between 17 and 22 new stores, including up to eight
airport locations, up to three Gardeners Eden stores and to remodel
approximately six to ten stores during Fiscal 2001.

    The Company maintains a revolving credit agreement to finance inventory
purchases, which historically peak in the third quarter in anticipation of the
winter holiday selling season. At May 5, 2001 and at April 29, 2000 the Company
had no borrowings outstanding under its revolving credit agreement.

    The Company believes that available borrowings, cash on hand and anticipated
cash generated from operations will be sufficient to finance planned retail
store openings, remodelings and other capital requirements throughout Fiscal
2001.

Outpost.com
-----------

     Effective June 1, 2001 the Company ended its arrangement with Outpost.com
to host and manage its Internet site Brookstone.com including the distribution
of customer orders. The Company has engaged Fry Associates to manage and host
the Brookstone.com Internet site and the Company will provide customer support
and order fulfillment through its direct marketing call center and distribution
facility located in Mexico, Missouri.

Outlook: Important Factors and Uncertainties
--------------------------------------------

     Statements in this quarterly report which are not historical facts,
including statements about the Company's confidence or expectations, plans for
opening new stores, capital needs and liquidity and other statements about the
Company's operational outlook, are forward-looking statements subject to risks
and uncertainties that could cause actual results to differ materially from
those set forth in such forward-looking statements. Such risks and uncertainties
include, without limitation, risks of changing market conditions in the overall
economy and the retail industry, consumer demand, the availability of
appropriate real estate locations and the ability to negotiate favorable lease
terms in respect thereof, customer response to the Company's direct marketing
initiatives, availability of products, availability of adequate transportation
of such products and other factors detailed from time to time in the Company's
annual and other reports filed with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date thereof. The Company undertakes no
obligations to publicly release any revisions to these forward-looking
statements or reflect events or circumstances after the date hereof.


                                       9
<PAGE>

                                   PART II

                               Other Information

Item 1:         LEGAL PROCEEDINGS
                -----------------

                Brookstone is involved in various routine legal proceedings
                incidental to the conduct of its business. The Company does not
                believe that any of these legal proceedings will have a material
                adverse effect on Brookstone's financial condition or results of
                operations.

Item 2:         CHANGES IN SECURITIES
                ---------------------

                None

Item 3:         DEFAULT UPON SENIOR SECURITIES
                ------------------------------

                None

Item 4:         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                ---------------------------------------------------

                None

Item 5:         OTHER INFORMATION
                -----------------

                None


Item 6:         EXHIBITS AND REPORTS ON FORM 8-K
                --------------------------------

        A)      None

                                       10
<PAGE>

                                  Signatures
                                  ----------


     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.



                            Brookstone, Inc.
                            ----------------
                              (Registrant)



                             /s/ Philip W. Roizin
                            ---------------------------------
       June 19, 2001                  (Signature)

                            Philip W. Roizin
                            Executive Vice President Finance and Administration,
                            Treasurer and Secretary
                            (Principal Financial Officer
                            and duly authorized to sign on behalf of registrant)

                                       11