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 October 31, 1998



                         Commission file number 0-21869

                                  dELiA*s Inc.
             (Exact name of registrant as specified in its charter)

         Delaware                                       13-3914035
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)                                           

                   435 Hudson Street, New York, New York 10014
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (212) 807-9060
              (Registrant's telephone number, including area code)



     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 [_]

     Number of shares of Common Stock outstanding as of December 10, 1998:
14,138,790


<PAGE>



     Certain statements contained herein, including, without limitation,
information appearing under "Part I - Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations," are forward-looking
statements (within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")). Forward-looking statements involve a
number of risks and uncertainties including, but not limited to, general
economic conditions, increases in materials, printing, paper, postage, shipping
and labor costs, timing of catalog mailings, customer response rates, levels of
competition and other factors outside the control of the Company. These factors,
and other factors that appear with the forward-looking statements, or in the
Company's other Securities and Exchange Commission filings, including its Annual
Report on Form 10-K for the year ended January 31, 1998, could affect the
Company's actual results and could cause the Company's actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company herein.

     All references in this Report to a particular fiscal year refer to the year
ended January 31 following the particular year (e.g., "fiscal 1998" refers to
the fiscal year ending January 31, 1999).


                                     PART I
                              FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

                                       2

<PAGE>



                          dELiA*s Inc. and Subsidiaries

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                January 31, 1998   October 31, 1998
                                                                ----------------   ----------------
                                                                         *           (Unaudited)
<S>                                                                  <C>                <C>
                                     ASSETS
CURRENT ASSETS
    Cash and cash equivalents....................................    $ 4,485            $ 3,454
    Short-term investments.......................................     37,075                 --
    Merchandise inventories .....................................     11,233             32,606
    Prepaid expenses and other current assets ...................      4,020             10,738
    Deferred taxes ..............................................      1,100              1,100
                                                                     -------            -------
        Total current assets ....................................     57,913             47,898
PROPERTY AND EQUIPMENT--Net .....................................      6,222             11,060
GOODWILL AND OTHER ASSETS .......................................        437             25,205
                                                                     -------            -------
TOTAL ASSETS ....................................................    $64,572            $84,163
                                                                     =======            =======
                                                                                     
                      LIABILITIES AND STOCKHOLDERS' EQUITY                           
CURRENT LIABILITIES                                                                  
    Accounts payable, accrued expenses and other current
      liabilities ...............................................    $19,849            $24,019
    Current portion of long-term debt and capital leases.........        105                113
                                                                     -------            -------
        Total current liabilities ...............................     19,954             24,132
                                                                                     
DEFERRED CREDITS ................................................        310                 --
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES..............        164                 67
COMMITMENTS AND CONTINGENCIES (NOTE 6)                                               
                                                                                     
STOCKHOLDERS' EQUITY.............................................     44,144             59,964
                                                                     -------            -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................    $64,572            $84,163
                                                                     =======            =======
</TABLE>                                                                       

* Condensed from audited financial statements

       See Notes to Unaudited Condensed Consolidated Financial Statements

                                       3

<PAGE>



                          dELiA*s Inc. and Subsidiaries

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                          Three Months
                                                                        Ended October 31, 
                                                                    -----------------------
                                                                      1997           1998
                                                                      ----           ----
                                                                          (Unaudited)
<S>                                                                  <C>          <C>     
NET SALES........................................................    $31,357      $ 40,821
COST OF SALES....................................................     16,514        19,979
                                                                     -------      --------
GROSS PROFIT.....................................................     14,843        20,842

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.....................     12,684        19,691
INTEREST INCOME, NET.............................................        338           126
                                                                     -------      --------
INCOME BEFORE INCOME TAXES.......................................      2,497         1,277
PROVISION FOR INCOME TAXES.......................................        870           530
                                                                     -------      --------
NET INCOME.......................................................    $ 1,627      $    747
                                                                     =======      ========
BASIC AND DILUTED NET INCOME PER SHARE...........................    $  0.12      $   0.05
                                                                     =======      ========
SHARES USED IN THE CALCULATION OF BASIC NET
    INCOME PER SHARE.............................................     13,301        14,139
                                                                     =======      ========
SHARES USED IN THE CALCULATION OF DILUTED NET
    INCOME PER SHARE.............................................     13,445        14,735
                                                                     =======      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                           Nine Months
                                                                        Ended October 31, 
                                                                    -----------------------
                                                                      1997           1998
                                                                      ----           ----
                                                                          (Unaudited)
<S>                                                                  <C>          <C>     
NET SALES........................................................     $70,140     $ 98,466
COST OF SALES....................................................      36,470       47,914
                                                                      -------     --------
GROSS PROFIT.....................................................      33,670       50,552
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.....................      30,880       47,282
INTEREST INCOME, NET.............................................         819          767
                                                                      -------     --------
INCOME BEFORE INCOME TAXES.......................................       3,609        4,037
PROVISION FOR INCOME TAXES.......................................       1,273        1,433
                                                                      -------     --------
NET INCOME.......................................................     $ 2,336     $  2,604
                                                                      =======     ========
BASIC AND DILUTED NET INCOME PER SHARE...........................     $  0.18     $   0.19
                                                                      =======     ========
SHARES USED IN THE CALCULATION OF BASIC NET
    INCOME PER SHARE.............................................      12,818       13,653
                                                                      =======     ========
SHARES USED IN THE CALCULATION OF DILUTED NET
    INCOME PER SHARE.............................................      12,945       13,990
                                                                      =======     ========
</TABLE>

       See Notes to Unaudited Condensed Consolidated Financial Statements

                                       4

<PAGE>

                          dELiA*s Inc. and Subsidiaries

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                           Nine Months
                                                                        Ended October 31, 
                                                                    -----------------------
                                                                      1997           1998
                                                                      ----           ----
                                                                          (Unaudited)
<S>                                                                  <C>          <C>     
CASH FLOWS USED IN OPERATING ACTIVITIES:
    Net income...................................................   $  2,336      $  2,604
    Adjustments to reconcile net income to net cash used in
     operating activities
      Depreciation and amortization..............................        517         1,631
      Amortization of investments................................         --           160
      Compensation expense related to issuance of restricted
         stock and stock appreciation rights.....................         75            44
      Changes in operating assets and liabilities:
            Merchandise inventories..............................     (6,990)      (18,262)
            Prepaid expenses and other current assets............     (5,960)       (6,677)
            Deferred taxes.......................................        629            --
            Other assets.........................................        (99)          165
            Current liabilities .................................      7,731         2,139
            Deferred credits.....................................        120          (310)
                                                                    --------      --------
    Net cash used in operating activities........................     (1,641)      (18,506)
                                                                    ========      ========
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
    Acquisitions, net of cash acquired (Note 1)..................        --        (15,187)
    Capital expenditures.........................................     (4,213)       (4,180)
    Purchases of investment securities
       Held-to-maturity..........................................    (27,769)           --
       Available for sale........................................         --       (46,513)
    Proceeds from the maturity of held-to-maturity investment
       securities................................................         --        30,024
    Proceeds from the sale of available-for-sale investment
       securities................................................         --        53,404
                                                                    --------      --------
Net cash provided by (used in) investing activities..............    (31,982)       17,548
                                                                    ========      ========
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
    Net proceeds from issuance of common stock...................     19,945            --
    Exercise of stock options....................................         --            82
    Net proceeds under line of credit agreement..................        796            --
    Proceeds from issuance of long-term debt.....................        168            --
    Principal payments of long-term debt and capital lease
       obligations...............................................       (243)         (155)
                                                                    --------      --------
Net cash provided by (used in) financing activities..............     20,666           (73)
                                                                    ========      ========
INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS ..................    (12,957)       (1,031)
CASH & CASH EQUIVALENTS--BEGINNING OF PERIOD.....................     21,717         4,485
                                                                    --------      --------
CASH & CASH EQUIVALENTS--END OF PERIOD ..........................   $  8,760       $ 3,454
                                                                    ========      ========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY:

Issuance of equity securities in connection with the Screeem!
Business acquisition (Note 1)
</TABLE>

       See Notes to Unaudited Condensed Consolidated Financial Statements

                                       5

<PAGE>

                          dELiA*s Inc. and Subsidiaries

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Business

    dELiA*s Inc. (together with its consolidated subsidiaries, the "Company")
is a teen-focused marketer of casual apparel, accessories, cosmetics, home
furnishings and soccer merchandise.

    In July 1998, the Company acquired assets located in 26 retail stores as
well as the leases for such stores and related trademarks (together, the
"Screeem! Business".) The acquisition has been accounted for as a purchase with
the excess of the aggregate purchase price over the fair market value of net
assets acquired allocated to goodwill based upon preliminary estimates of fair
values. The Company does not expect the final purchase allocation to differ
significantly from the preliminary purchase price recorded. On a pro forma
basis, assuming the acquisition had occurred on the first day of each fiscal
year, net sales, net income and earnings per share would have been $92,100,000,
$1,924,000 and $0.14, respectively, for the nine months ended October 31, 1997
and $112,991,000, $1,489,000 and $0.10, respectively, for the nine months ended
October 31, 1998. These results are presented for informational purposes only
and do not necessarily represent results which would have occurred nor are they
indicative of future results of combined operations.

    In September 1998, the Company acquired certain assets from the estate of
Fulcrum Direct, Inc. for approximately $4.75 million in cash. The primary assets
included the trademarks and customer lists for the Zoe, Storybook Heirlooms,
Playclothes, After the Stork and Just for Kids catalogs. The Company also
purchased selected Zoe and Storybook Heirlooms inventory and assumed certain
Storybook Heirlooms customer refund liabilities. The acquisition has been
accounted for as a purchase with the excess of the aggregate purchase price over
the fair market value of net assets acquired allocated to goodwill based upon
preliminary estimates of fair values. The Company does not expect the final
purchase allocation to differ significantly from the preliminary purchase price
recorded.

    The Company is subject to seasonal fluctuations in its merchandise sales and
results of operations. The Company expects its net sales and operating results
generally to be lower in the first and second quarters than in the third and
fourth quarters (which include the majority of the back-to-school season and the
holiday season) of each fiscal year.


2. Summary of Significant Accounting Policies and Basis of Presentation

    a. Principles of Consolidation--The condensed consolidated financial
statements include the accounts of dELiA*s Inc. and subsidiaries, all of which
are wholly owned. All significant intercompany balances and transactions have
been eliminated in consolidation.

                                       6

<PAGE>

                          dELiA*s Inc. and Subsidiaries

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

    b. Unaudited Interim Financial Statements--The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance
with the requirements for Form 10-Q and in accordance with generally accepted
accounting principles for interim financial reporting. In the opinion of
management, the accompanying condensed consolidated financial statements are
presented on a basis consistent with the audited consolidated financial
statements and reflect all adjustments (consisting of normal recurring items)
necessary for a fair presentation of results for the interim periods presented.
The financial statements and footnote disclosures should be read in conjunction
with the Company's January 31, 1998 audited consolidated financial statements
and the notes thereto, which are included in the Company's Annual Report on Form
10-K for the year ended January 31, 1998, which was filed under the Securities
Exchange Act of 1934. Results for the interim periods are not necessarily
indicative of the results to be expected for the year.

    c. Reclassifications--Certain amounts have been reclassified to conform to
the October 31, 1998 presentation.

    d. Recent Accounting Pronouncements--In June 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standard
("SFAS") No. 130, "Reporting Comprehensive Income," which is effective for
fiscal years beginning after December 15, 1997. SFAS No. 130 establishes
standards for reporting and display of comprehensive income. The adoption of
SFAS No. 130 as of February 1, 1998 did not have an effect on the Company's
financial statements or disclosure as the Company has no reconciling items.
Therefore net income and comprehensive income are the same.

    In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 requires that public companies
report certain information about operating segments in their annual financial
statements and in subsequent condensed financial statements of interim periods
issued to shareholders. This statement also requires that public companies
report certain information about their products and services, the geographic
areas in which they operate and their major customers. The Company is currently
reviewing the impact of this statement on its current level of disclosure.

    In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" which is effective for fiscal
years beginning after December 15, 1997. SFAS No. 132 revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. This statement
standardizes the disclosure requirements for pension and other postretirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis and eliminates certain disclosures. The Company has
determined that the adoption of this new standard will not have a material
effect on the Company's disclosure for all periods presented.

    In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, which is effective for fiscal
years beginning after June 15, 1999, requires the Company to recognize all
derivatives on the balance sheet at fair value. The Company has determined that
the adoption of this new standard will not have a material effect on the
Company's financial statements or disclosure for all periods presented.

                                       7

<PAGE>

                          dELiA*s Inc. and Subsidiaries

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)

3. Property and Equipment

    Major classes of property and equipment are as follows:

<TABLE>
<CAPTION>
                                            Estimated      October 31,    January 31,
                                           Useful Lives       1998           1998
                                           ------------    -----------    -----------
                                                           (Unaudited)
<S>                                         <C>           <C>             <C>       
Furniture, fixtures and equipment.......    5-10 years     $10,414,000    $5,444,000
Leasehold improvements..................  Term of lease      2,833,000     1,842,000
                                                           -----------    ----------
Total--at cost..........................                    13,247,000     7,286,000
Less accumulated depreciation and
  amortization..........................                     2,187,000     1,064,000
                                                           -----------    ----------
Total property and equipment--net.......                   $11,060,000    $6,222,000
                                                           ============   ==========
</TABLE>

4. Credit and Financing Agreements

    At October 31, 1998, the Company had a line of credit agreement with a bank
providing for short-term loans of up to $5.0 million subject to bank approval.
Borrowings under the agreement are secured by all assets of the Company except
for merchandise inventories and bear interest at the prime rate (8 percent at
October 31, 1998 and 8.5 percent at January 31, 1998). There were no funds
borrowed under the agreement during the nine month period ended October 31, 1998
and the fiscal year ended January 31, 1998. Outstanding letters of credit
established to facilitate international merchandise purchases at October 31,
1998 were $2,286,000.

     On December 7, 1998 the Company entered into a Credit Agreement with First
Union National Bank (the "Credit Agreement"). The Credit Agreement established a
new credit facility which replaced the Company's previous line of credit
agreement. The new credit facility, which terminates on December 7, 2001,
consists of a revolving line of credit permitting the Company to borrow up to
$25 million. Under this facility, the Company has the ability to cause the
lender(s) to issue documentary and standby letters of credit up to $10 million.
The Company's obligations under the Credit Agreement are secured by a lien on
substantially all of the Company's assets, except certain real property. The
ability of the Company to borrow under the Credit Agreement is subject to a
number of conditions including compliance with tangible net worth, fixed charge
cover ratio and debt to cash flow covenants. The availability of the unused
revolving line of credit is limited to specified percentages of the value of the
Company's eligible inventory determined under the Credit Agreement. At the
option of the Company, borrowings under this facility bear interest at First
Union National Bank's prime rate or at LIBOR plus 200 basis points. The Credit
Agreement contains certain covenants and default provisions customary for credit
facilities of this nature, including limitations on payment of dividends by the
Company. A fee of 0.375% per year is assessed monthly on the unused portion of
the line of credit.

                                       8

<PAGE>

                          dELiA*s Inc. and Subsidiaries

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued)


5. Stock Options

    In the nine month period ended October 31, 1998, options to purchase shares
of Common Stock were granted to 194 employees of the Company and its
subsidiaries. These options will become exercisable over a period of six months
to five years from the date of grant. The exercise price per share of each such
option is generally equal to the fair market value of the Common Stock on the
date of grant.

     On September 15, 1998, the Company reduced the exercise price of
outstanding common stock options held by the Company's employees and
non-employee directors to the fair market value per share as of that date. The
Company repriced these stock options in an effort to retain employees at a time
when a significant percentage of stock options had exercise prices that were
above fair market value. The Company believes that stock options are a valuable
tool in compensating and retaining employees. After repricing, these options
maintained the same vesting and expiration terms. Not all grants to officers
were repriced. Executive officers forfeited a portion of prior grants in
connection with the repricing.

    A summary of all plan and non-plan stock option activity follows:

<TABLE>
<CAPTION>
                                            Fiscal Year                 Nine months
                                       Ended January 31, 1998     Ended October 31, 1998
                                      ------------------------   ------------------------
                                                   Weighted                   Weighted
                                      Options   Exercise Price   Options   Exercise Price
                                      -------   --------------   -------   --------------
<S>                                   <C>           <C>          <C>            <C>   
Outstanding at beginning of period    383,750       $11.00         744,437        $14.96
    Granted (excludes repricing)      362,937        19.13       2,013,483         17.54
    Exercised                          (2,250)       11.00          (7,375)        11.11
    Cancelled (excludes repricing)         --           --        (132,100)        18.03
                                      -------                    ---------
Outstanding at end of period          744,437        14.96       2,618,445          6.49
                                      =======                    =========

Exercisable at end of period          107,500       $11.24         317,987         $5.75                           
                                      =======                    =========
</TABLE>

    The Company applies APB No. 25 and related interpretations in accounting for
stock options. Accordingly, no compensation expense has been recognized for
those options granted to employees in the nine month period ended October 31,
1998 and the year ended January 31, 1998.

    On September 16, 1998, two employees and a financial advisor were granted
options to purchase stock in Storybook Inc., a wholly-owned subsidiary of the
Company. The options become exercisable two years after the date of grant and
expire ten years after the date of grant. The defined exercise price is equal to
the fair market value at the date of grant.


6. Commitments and Contingencies

     In connection with the Screeem! Business acquisition, the Company has
agreed that if the mean of the intraday high and low bid prices for the Common
Stock for the 20 consecutive trading days immediately preceding January 10, 2000
(the "18-Month Price") is less than $18.00, it will issue to the sellers that
number of additional shares of Common Stock that is equal to (i) the excess of
(x) the product of 208,334 shares (subject to adjustment) multiplied by $18.00
over (y) the product of 208,334 shares multiplied by the greater of the 18-Month
Price or $10.00 divided by (ii) the 18-Month Price.

                                       9

<PAGE>

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

    The following discussion and analysis should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and Notes thereto included
elsewhere in this Report.

Overview

     The Company is a teen-focused marketer of casual apparel, accessories,
cosmetics, home furnishings and soccer merchandise. Through dELiA*s catalog and
web site which target girls and young women between the ages of 10 and 24 (an
age group known as "Generation Y"), the Company believes it is the leading
direct marketer of casual apparel, related accessories and cosmetics to
Generation Y. Through its TSI Soccer catalog, retail stores and web site, the
Company is a leading direct marketer and retailer of specialty soccer
merchandise to Generation Y boys and girls. In addition to www.dELiAs.com and
www.TSIsoccer.com, the Company's rapidly growing internet presence includes
www.discountdomain.com, www.Droog.com and www.ContentsOnline.com as well as the
www.gURL.com community websites. Through its recently acquired Screeem! and Jean
Country retail stores, the Company offers its customers progressive,
fashion-forward, unisex branded apparel through a dynamic mall-based shopping
experience featuring live DJs, fashion models and promotional appearances and
events.

     In September 1998, the Company acquired certain assets from the estate of
Fulcrum Direct, Inc. for approximately $4.75 million in cash. The primary assets
included the trademarks and customer lists for the Zoe, Storybook Heirlooms,
Playclothes, After the Stork and Just for Kids catalogs. The Company also
purchased selected Zoe and Storybook Heirlooms inventory and assumed certain
Storybook Heirlooms customer refund liabilities. The Company plans to begin
distributing the Storybook Heirlooms catalog in January 1999. This catalog
primarily targets girls ages 6 to 12 with fashionable, upscale special occasion
outfits and accessories.

    The Company maintains a corporate headquarters, telemarketing and customer
service group in New York, New York, additional telemarketing and corporate
facilities in Durham, North Carolina and a fulfillment facility for processing
merchandise in Hanover, Pennsylvania. The Storybook Heirlooms business is based
in the San Francisco, California area.


Results of Operations

    The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's statement of operations to net
sales. Any trends reflected by the following table may not be indicative of
future results.

<TABLE>
<CAPTION>
                                                       Three Months            Nine months
                                                     Ended October 31,      Ended October 31, 
                                                     -----------------      ----------------- 
                                                      1998     1997           1998     1997
                                                      ----     ----           ----     ----
<S>                                                  <C>      <C>            <C>      <C>   
Net sales                                            100.0%   100.0%         100.0%   100.0%
Cost of sales                                         49.0     52.7           48.7     52.0
                                                     -----    -----          -----    ----- 
Gross profit                                          51.0     47.3           51.3     48.0
Selling, general and administrative expenses          48.2     40.4           48.0     44.0
Interest income, net                                   0.3      1.1            0.8      1.1 
                                                     -----    -----          -----    ----- 
Income before income taxes                             3.1      8.0            4.1      5.1
Provision for income taxes                             1.3      2.8            1.5      1.8
                                                     -----    -----          -----    ----- 
Net income                                             1.8%     5.2%           2.6%     3.3%
                                                     =====    =====          =====    =====
</TABLE>

                                       10

<PAGE>

Comparison of Three Months Ended October 31, 1998 and 1997

     Net Sales. Net sales increased approximately $9.4 million to $40.8 million
in the third quarter of fiscal 1998 from $31.4 million in the third quarter of
fiscal 1997. Sales increases were primarily driven by the July Screeem! Business
acquisition. The Company distributed approximately 20% more catalogs in the
third quarter of fiscal 1998 as in the third quarter of fiscal 1997, although
variances in the timing of mailings render comparisons unmeaningful. Aggregate
response rates from catalogs distributed in the third quarter of fiscal 1998
declined relative to catalogs distributed in the third quarter of fiscal 1997 as
the Company (i) broadened the distribution of its catalogs and increased its
prospecting efforts and (ii) mailed additional catalog editions to a large
number of persons who had received a prior edition of those catalogs earlier in
the period. The Company believes aggregate response rates will usually decline
as it broadens the distribution of its catalog and when it mails additional
catalog editions within the same fiscal period.

    Gross Margin. Gross margin increased to 51.0% in the third quarter of fiscal
1998 from 47.3% in the third quarter of fiscal 1997. The increase in gross
profit as a percentage of sales reflects higher average price points in the TSI
Soccer business and continued growth in sales of higher margin dELiA*s branded
product.

    Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $7.0 million to $19.7 million in
the third quarter of fiscal 1998 from $12.7 million in the third quarter of
fiscal 1997. Selling, general and administrative expenses increased as a
percentage of net sales from 40.4% in the third quarter fiscal 1997 to 48.2% in
the third quarter of fiscal 1998. The increase was due to greater spending on
catalog circulation, advertising and database management as well as increased
expenses associated with the company's development of its internet and retail
infrastructure.

Comparison of Nine Months Ended October 31, 1998 and 1997

    Net Sales. Net sales increased approximately $28.4 million to $98.5 million
in the first nine months of fiscal 1998 from $70.1 million in the first nine
months of fiscal 1997. Sales increases were driven by the July Screeem! Business
acquisition as well as increased catalog circulation and strong outlet store
sales. The Company distributed approximately 48% more catalogs (excluding sales
circulars) in the first nine months of fiscal 1998 as in the first nine months
of fiscal 1997. Aggregate response rates from catalogs distributed in the first
nine months of fiscal 1998 declined relative to catalogs distributed in the
first nine months of fiscal 1997 as the Company (i) broadened the distribution
of its catalogs and increased its prospecting efforts and (ii) mailed additional
catalog editions to a large number of persons who had received a prior edition
of those catalogs earlier in the period. The Company believes aggregate response
rates will usually decline when it broadens the distribution of its catalog and
when it mails additional catalog editions within the same fiscal period.

    Gross Margin. Gross margin increased to 51.3% in the first nine months of
fiscal 1998 from 48.0% in the first nine months of fiscal 1997. The increase in
gross profit as a percentage of sales reflects higher average price points in
the TSI Soccer businesses and continued growth in sales of higher margin dELiA*s
branded product as well as lower markdowns and better recovery on discounted
sales through the Company's liquidation outlets.

    Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $16.4 million to $47.3 million
in the first nine months of fiscal 1998 from $30.9 million in the first nine
months of fiscal 1997. Selling, general and administrative expenses increased as
a percentage of net sales from 44.0% in the first nine months of fiscal 1997 to
48.0% in the first nine months of fiscal 1998. The increase was due to greater
spending on catalog circulation, advertising and

                                       11

<PAGE>

database management as well as increased expenses associated with the company's
development of its internet and retail infrastructure. Expenses related to the
recently acquired retail stores, including depreciation and amortization
expenses, also contributed to this increase.

Selected Quarterly Results of Operations

    The following table sets forth certain unaudited statement of operations
data for the seven quarters ended October 31, 1998, as well as such data
expressed as a percentage of the Company's total net sales for the periods
indicated. This data has been derived from unaudited financial statements that,
in the opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for fair presentation of such information when
read in conjunction with the Company's annual audited financial statements and
notes thereto.

<TABLE>
<CAPTION>
                                ----------------------------------------------------------------------
                                                            Quarter Ended
                                ----------------------------------------------------------------------
                                        Fiscal 1998                           Fiscal 1997
                                ---------------------------      -------------------------------------
                                Oct. 31,  July 31,  Apr. 30,     Jan. 31,  Oct. 31,  July 31,  Apr. 30,
                                  1998      1998      1998         1998      1997      1997      1997
                                  ----      ----      ----         ----      ----      ----      ----
                                                            (in thousands)
<S>                             <C>       <C>       <C>          <C>       <C>       <C>       <C>    
Net sales..................     $40,821   $26,451   $31,194      $42,909   $31,357   $21,086   $17,697
Cost of sales..............      19,979    13,712    14,223       21,397    16,514    10,678     9,278
                                -------   -------   -------      -------   -------   -------   -------
Gross profit...............      20,842    12,739    16,971       21,512    14,843    10,408     8,419
Selling, general and                                 
   administrative expenses.      19,691    13,499    14,092       17,007    12,684    10,148     8,048
Merger-related costs.......          --        --        --        1,614        --        --        --
Interest income, net.......         126       300       341          382       338       268       213
                                -------   -------   -------      -------   -------   -------   -------
Income (loss) before income     
   taxes...................       1,277      (460)    3,220        3,273     2,497       528       584
Provision (benefit) for             
   income taxes............         530      (317)    1,220        1,183       870       141       262
                                -------   -------   -------      -------   -------   -------   -------
Net income (loss) .........     $   747   $  (143)  $ 2,000      $ 2,090   $ 1,627   $   387   $   322
                                =======   =======   =======      =======   =======   =======   =======

                                                         Percentage of Net Sales
                                ----------------------------------------------------------------------
Net sales..................       100.0%    100.0%    100.0%       100.0%    100.0%    100.0%    100.0%
Cost of Sales..............        49.0      51.8      45.6         49.9      52.7      50.7      52.4
                                -------   -------   -------      -------   -------   -------   -------
Gross profit...............        51.0      48.2      54.4         50.1      47.3      49.3      47.6
Selling, general and
    administrative expenses        48.2      51.0      45.2         39.6      40.4      48.1      45.5
Merger-related costs.......          --        --       --           3.8        --        --        --
Interest income, net.......         0.3       1.1       1.1          0.9       1.1       1.3       1.2
                                -------   -------   -------      -------   -------   -------   -------
Income (loss) before income
    taxes..................         3.1      (1.7)     10.3          7.6       8.0       2.5       3.3
Provision (benefit) for    
    income taxes...........         1.3      (1.2)      3.9          2.7       2.8       0.7       1.5
                                -------   -------   -------      -------   -------   -------   -------
Net income (loss)..........         1.8%     (0.5)%     6.4%         4.9%      5.2%      1.8%      1.8%
                                =======   =======   =======      =======   =======   =======   =======
</TABLE>

    The Company is subject to seasonal fluctuations in its merchandise sales and
results of operations. The Company expects its net sales and results of
operations generally to be lower in the second quarter and higher in the fourth
quarter (which includes the holiday season) of each fiscal year. The Company's
quarterly results may fluctuate as a result of numerous factors, including the
timing, quantity and cost of catalog mailings, responses to those mailings, the
timing of sale circulars and liquidations, the timing of merchandise deliveries,
market acceptance of the Company's merchandise (including new merchandise
categories or products introduced), the mix of products sold, the hiring and
training of additional personnel, the timing of inventory writedowns, the
integration of acquisitions, the incurrence of other operating costs and factors
beyond the Company's control, such as general economic conditions and actions of
competitors. Accordingly, the results of operations in any quarter will not
necessarily be indicative of the results that may be achieved for a full fiscal
year or any future quarter.

                                       12

<PAGE>


Liquidity and Capital Resources

    Cash used in operations in the first nine months of fiscal 1998 and 1997 was
$18.5 million and $1.6 million, respectively. The increase in cash used in
operations primarily relates to an increase in inventory levels in an effort to
improve fill rates and in anticipation of greater sales. The increase also
reflects earlier payment of certain liabilities, including accounts payable due
to inventory vendors and other vendors, which allowed the Company to take
advantage of better terms.

    Cash provided by investing activities in the first nine months of fiscal
1998 and cash used in investing in the first nine months of fiscal 1997 was
$17.5 million and $32.0 million, respectively, including the sale of short-term,
investment-grade investments in fiscal 1998 and the purchase of short-term,
investment-grade investments in fiscal 1997. The Company expects to make
additional capital expenditures of approximately $2.0 million to upgrade its
management information systems in fiscal 1998. The Company also anticipates
additional capital expenditures of approximately $2.0 million in fiscal 1998 for
property, plant and equipment, including leasehold improvements, office
equipment and expenditures relating to the conversion of Jean Country stores to
Screeem! stores and the Company's warehouse and distribution operations.

    The Company did not engage in any significant cash financing activities in
the first nine months of fiscal 1998. Cash flows from financing activities in
the first nine months of fiscal 1997 were $20.7 million as a result of a public
offering of common stock.

    Cash and cash equivalents decreased by approximately $1 million to $3.5
million at October 31, 1998 from $4.5 million at January 31, 1998.

     At October 31, 1998, the Company had a revolving line of credit for
seasonal working capital, collateralized by all of the Company's assets other
than inventory. The maximum amount available under the line of credit was $5.0
million. The interest rate on the line of credit was the lending bank's prime
rate (8% at October 31, 1998). The Company had not drawn on this line.
Outstanding letters of credit established to facilitate international
merchandise purchases at October 31, 1998 were $2.3 million.

     On December 7, 1998 the Company entered into a Credit Agreement with First
Union National Bank (the "Credit Agreement"). The Credit Agreement established a
new credit facility which replaced the Company's previous line of credit
agreement. The new credit facility, which terminates on December 7, 2001,
consists of a revolving line of credit permitting the Company to borrow up to
$25 million. Under this facility, the Company has the ability to cause the
lender(s) to issue documentary and standby letters of credit up to $10 million.
The Company's obligations under the Credit Agreement are secured by a lien on
substantially all of the Company's assets, except certain real property. The
ability of the Company to borrow under the Credit Agreement is subject to a
number of conditions including compliance with tangible net worth, fixed charge
cover ratio and debt to cash flow covenants. The availability of the unused
revolving line of credit is limited to specified percentages of the value of the
Company's eligible inventory determined under the Credit Agreement. At the
option of the Company, borrowings under this facility bear interest at First
Union National Bank's prime rate or at LIBOR plus 200 basis points. The Credit
Agreement contains certain covenants and default provisions customary for credit
facilities of this nature, including limitations on payment of dividends by the
Company. A fee of 0.375% per year is assessed monthly on the unused portion of
the line of credit.

Inflation

    The Company does not believe that inflation has had a material adverse
effect on net sales or results of operations. The Company has generally been
able to pass on increased costs related to inflation through increases in its
prices to customers.
                                       13

<PAGE>
Year 2000

    The Company recognizes that its operations may be negatively affected by
Year 2000 software issues. The Company is heavily dependent upon complex
computer software and systems for all phases of its operations. Many existing
computer programs and systems use only two digits to identify a year in the date
field. These programs and systems were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
Year 2000. Accordingly, the Company has prepared a Year 2000 compliance program
which involves (i) identifying the material operating software and systems on
which the Company depends (whether used by the Company or by the Company's
service providers), (ii) obtaining written warranties or assurances from third
party software and systems vendors and service providers, (iii) monitoring the
compliance efforts of such vendors and service providers and (iv) testing its
material operating software and systems.

    All of the Company's material operating software and systems, including
telecommunications and warehouse systems, in addition to information technology
systems, were developed by and are supported by third party vendors. Each of the
third party vendors of the Company's mission-critical operating software have
provided written warranties or assurances to the Company that such software will
not be affected by the change in the century, with the exception of vendors of
operating software used in the Company's Storybook Heirlooms business which was
acquired on September 16, 1998. The Company is presently in the process of
attempting to obtain written warranties or assurances from the vendors of this
software. The majority of the third party vendors of the Company's other
material operating software and systems have also provided such warranties or
assurances that such software and systems will be compliant by December 31,
1998. The Company expects to begin performing tests of all its material
operating software and systems to verify the assurances given by these third
party vendors and ensure Year 2000 compliance later in fiscal 1998. However,
there can be no assurance that all of the Company's material operating software
and systems will be in Year 2000 compliance.

    In addition to the operating systems and software the Company uses directly,
the Company's operations are also dependent upon the performance of operating
software and systems used by its significant service providers, including
providers of financial, telecommunications and parcel delivery services. The
Company has contacted each of its significant service providers and has obtained
written assurances from the majority of such providers that the providers'
relevant operating software and systems are in Year 2000 compliance or will be
by December 31, 1998. The Company is monitoring the status of all its
significant service providers' Year 2000 compliance efforts to minimize the risk
of any material adverse effect on the Company's operations resulting from
compliance failures. However, there can be no assurance that the Company's
service providers have, or will have, operating software and systems that are in
Year 2000 compliance.

    A software or systems Year 2000 compliance failure with respect to the
Company's internal systems and software, or that of third party service
providers, could prevent the Company from being able to process or fulfill
orders from its customers, or could disrupt the Company's financial and
management controls and reporting systems. Any such failure, if not quickly
remedied, would have a material adverse effect on the Company. Therefore, the
Company is developing contingency plans with respect to such systems and
software.

     In addition, a significant portion of purchases of merchandise from the
Company are made with credit cards, and the Company's operations may be
materially adversely affected to the extent its customers are unable to use
their credit cards due to Year 2000 issues that are not rectified by the
customers' credit card vendors. The Company has not identified significant
exposure to Year 2000 problems outside of those information technology issues
identified above.

     Except with respect to systems used by the Storybook Heirlooms business,
which the Company is presently evaluating, the Company does not expect its costs
of addressing Year 2000 issues to be significant. However, given the Company's
dependence on third party software and

                                       14

<PAGE>

system vendors and service providers and on its customers' vendors, there can be
no assurance to that effect.


                                       15

<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings

    The Company is not involved in any legal proceedings that management
believes would have a material adverse effect on the Company's financial
position or results of operations.


Item 6. Exhibits and Reports on Form 8-K.

(a)    Exhibits
       See "Exhibit Index" following the signature page.

(b)    The Company filed a Current Report on Form 8-K, dated September 11,
       1998, reporting Item 7. This report contained historical and pro forma
       financial information about the Screeem! Business.

                                       16

<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.

                             dELiA*s Inc.
                             (Registrant)
Date: December 15, 1998

                             By: /s/ Stephen I. Kahn
                                 -------------------
                                 Stephen I. Kahn
                                 Chairman of the Board, President and
                                 Chief Executive Officer


                             By: /s/ Evan Guillemin
                                 -------------------
                                 Evan Guillemin
                                 Chief Financial Officer and Treasurer
                                 (principal financial and accounting officer)



                                       17


<PAGE>

                                  Exhibit Index

 2.1   Bill of Sale and Contribution and Assumption Agreement between dELiA*s
       LLC and the Company (incorporated by reference to Exhibit 2.1 to the
       Company's Registration Statement on Form S-1 (Registration No.
       333-15153))

 3.1   Certificate of incorporation of the Company (incorporated by reference to
       Exhibit 3.1 to the Company's Registration Statement on Form S-1
       (Registration No. 333-15153))

 3.2   Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the
       Company's Registration Statement on Form S-1 (Registration
       No. 333-15153))

10.1   Form of Employment Agreement between the Company and Stephen I. Kahn
       (incorporated by reference to Exhibit 10.1 to the Company's Registration
       Statement on Form S-1 (Registration No. 333-15153))

10.2   Employment Agreement between the Company and Christopher C. Edgar
       (incorporated by reference to Exhibit 10.2 to the Company's Registration
       Statement on Form S-1 (Registration No. 333-15153))

10.3   Employment Agreement between the Company and Evan Guillemin (incorporated
       by reference to Exhibit 10.3 to the Company's Registration Statement on
       Form S-1 (Registration No. 333-15153))

10.4   Form of Family Stockholders Agreement among the Company, Stephen I. Kahn
       and the persons listed on exhibit A thereto (incorporated by reference to
       Exhibit 10.4 to the Company's Registration Statement on Form S-1
       (Registration No. 333-15153))

10.5   Amended and Restated 1996 Stock Incentive Plan (incorporated by reference
       to the Company's Schedule 14A filed on June 12, 1998)

10.6   Restricted Stock Plan (incorporated by reference to Exhibit 10.6 to the
       Company's Registration Statement on Form S-1 (Registration No.
       333-15153))

10.7   Stock Option Agreement between the Company and Evan Guillemin
       (incorporated by reference to Exhibit 10.7 to the Company's Registration
       Statement on Form S-1 (Registration No. 333-15153))

10.8    Transitional Services Agreement, dated as of July 10, 1998, among
        American Retail Enterprises, L.P., Screeem Inc., and the Company
        (incorporated by reference to Exhibit 10.8 to the Company's Quarterly
        Report on Form 10-Q for the fiscal quarter ended July 31, 1998)

10.9   Lease Agreement dated May 3, 1995 between the Company and The Rector,
       Church-Wardens and Vestrymen of Trinity Church in the City of New-York
       (the "Lease Agreement"); Modification and Extension of Lease Agreement
       dated September 26, 1996 (incorporated by reference to Exhibit 10.9 to
       the Company's Registration Statement on Form S-1 (Registration No.
       333-15153))

10.10  Form of Restricted Stock Agreements between the Company and holders of
       Common Stock subject to the Restricted Stock Plan (incorporated by
       reference to Exhibit 10.10 to the Company's Registration Statement on
       Form S-1 (Registration No. 333-15153))

10.11  [omitted]

10.12  Lease Agreement dated April 25, 1997 between the Company and Keystone
       Distribution Center, Inc. (incorporated by reference to Exhibit 10.12 to
       the Company's Annual Report on Form 10-K for the fiscal year ended
       January 31, 1997)

                                       18

<PAGE>

10.13  Agreement dated April 4, 1997 between the Company and The Rector, Church
       Wardens and Vestrymen of Trinity Church in the City of New York amending
       the Lease Agreement (incorporated by reference to Exhibit 10.13 to the
       Company's Annual Report on Form 10-K for the fiscal year ended January
       31, 1997)

10.14  Agreement dated October 7, 1997 between the Company and The Rector,
       Church Wardens and Vestrymen of Trinity Church in the City of New York
       amending the Lease Agreement (incorporated by reference to Exhibit 10.14
       to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
       ended October 31, 1997)

10.15  Amendment No. 1 to Employment Agreement between Christopher C. Edgar,
       dated September 15, 1998

10.16  Amendment No. 1 to Employment Agreement between Evan Guillemin, dated
       September 15, 1998

10.17  Credit Agreement dated December 7, 1998 between First Union National
       Bank, the Company and its subsidiaries listed on Schedule 1 thereto

27     Financial Data Schedule

                                       19