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FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FIFTY-TWO WEEK PERIOD ENDED JANUARY 29, 1994 COMMISSION FILE
NUMBER 1-8765

CARTER HAWLEY HALE STORES, INC.

DELAWARE 94-0457907
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

3880 NORTH MISSION ROAD
LOS ANGELES, CALIFORNIA 90031
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 227-2000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF CLASS ON WHICH REGISTERED
-------------- ---------------------

Common Stock and New York Stock Exchange and
Warrants Pacific Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

None

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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- -----

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

Aggregate market value of common stock held by non-affiliates of the registrant
as of April 25, 1994: $231,610,552

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 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 X No
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Number of shares of common stock outstanding as of April 25, 1994: 45,619,792

DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------

Part III incorporates certain information by reference to the Company's
Definitive Proxy Statement Relating to the Annual Meeting of Stockholders to be
held on June 17, 1994.

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PART I

ITEM I. BUSINESS

GENERAL

Carter Hawley Hale Stores, Inc. (the "Company"), is one of the leading
operators of department stores in California and the Southwestern United States.
Organized in 1896, the Company currently operates 83 department stores under the
names The Broadway, Emporium and Weinstocks with more than 15 million gross
square feet of retail space. The Company's 41 Southern California stores
generate approximately 50% of the Company's sales. Approximately 40% of the
Company's sales are generated by its Emporium and Weinstocks stores located in
Northern California. The remainder of the Company's sales are generated through
stores located in Arizona, Nevada, Colorado and New Mexico. The Company's
stores are generally situated in prime locations in popular malls and retail
shopping centers.

Management believes the Company enjoys a number of significant strengths.
These include operating in convenient store locations, a loyal customer base and
an advanced management information system.

- LOCATIONS AND DEMOGRAPHICS. During the bankruptcy proceedings, the
Company was able to close certain under-performing stores, and reduce
lease and common area maintenance charges at a number of locations.
As a result, Management believes the Company now has a focused
portfolio of stores in desirable locations at attractive costs,
although Management continues to evaluate the profitability and
strategic contribution of each store. See "Item 2. Properties."
While the recent national recession has affected California to a
greater extent than most other regions of the country, Management
believes the Company is well positioned to benefit from any regional
economic recovery.

- ADVANCED MANAGEMENT INFORMATION SYSTEM. The Company believes its
management information system ("MIS System") is among the most
advanced and efficient in the department store retailing industry.
The MIS System provides sophisticated inventory tracking and control,
automatic inventory replenishment of certain items through links to
key vendors, price look-up capability and a fully integrated voice and
data communication network. See "Company Operations -- Management
Information System".

At the annual stockholders meeting scheduled for June 17, 1994,
stockholders of the Company as of April 25, 1994, will vote on a proposal to
change the name of the Company to Broadway Stores Inc. Management believes the
new name will more closely link the Company's corporate identity with its
operations and that The Broadway stores, which comprise 52 of the Company's
total 83 stores, has a long tradition as an important part of the California
marketplace and enjoys strong customer loyalty. The corporate name change would
not result in a change of the names of the Company's three chains on an
operating level.

The Company has been informed that a holder of more than 50% of the shares
entitled to vote, Zell/Chilmark Fund, L.P., intends to vote for the corporate
name change. If Zell/Chilmark does in fact so vote its shares, the approval of
this proposal is assured irrespective of the votes of other stockholders.

RECENT COMPANY HISTORY

INTRODUCTION

During the last two years, the Company has implemented substantial
operating and financial changes which have significantly reshaped both its
business and capitalization.

CONSOLIDATION OF OPERATIONS

The Company has completed a consolidation of its operations, which resulted
in a significant reduction of administrative expenses. The Company consolidated
its four separate divisions into one, which also permitted the closure of two
warehouses in Northern California. Management believes these steps resulted in
cost savings of approximately $30.0 million per year. The Company combined its
proprietary credit and accounts payable operations into a single administrative
center, which Management believes has resulted in annual cost savings of
approximately $6.0 million compared to amounts paid in the year prior to the
filing of the chapter 11 petition. The Company also downsized its data
processing operation, which Management believes reduced annual data processing
costs by approximately $17.0 million. In addition, the Company negotiated
significant reductions in its annual equipment and real estate lease and common
area charge payments of $15 million compared to the amounts paid for the year
prior to filing for bankruptcy. See "Company Operations -- Consolidation of
Operations." In September 1993 the Company completed a study ("activity value
analysis" or "AVA") to identify ways to reduce administrative costs. See
"Business Strategy -- Reduce Costs." Management believes the implementation of
these measures will yield annual cost-savings of approximately $40 million by
1995, of which $7 million were realized in 1993, with additional annualized
savings of $30 million and $3 million expected to be realized during fiscal 1994
and 1995 respectively. Due to actions unrelated to these programs, results of
operations for future periods will not necessarily reflect, on a net basis, the
full amount of savings indicated above. Future operations will reflect higher
marketing and sales promotion costs to access new ethnic markets, a projected
increase in benefit costs, and an increase in depreciation expense as a result
of the Company's projected capital expenditure program.

RESTRUCTURED BALANCE SHEET

The Company has significantly restructured its secured debt obligations by
extending maturities and adjusting the prospective interest and principal
payment terms for such debt. During the bankruptcy proceedings, the Company
restructured its secured and unsecured debt, obtained a $50.0 million cash
equity infusion and put in place a new three-year Credit Facility and a new
three-year Receivables Based Facility. In connection with the Company's
reorganization and recapitalization, Zell/Chilmark acquired approximately 70% of
the Common Stock. Additionally, the Company successfully completed a public
offering of Common Stock in July 1993, which raised net proceeds of
approximately $147.5 million through the issuance of 11.45 million shares of
stock and raised approximately $137.9 million from an issuance of 6 1/4%
Convertible Senior Subordinated Notes in December 1993. As of April 25, 1994,
Zell/Chilmark owned approximately 54.4% of the Company's outstanding Common
Stock.

NEW MANAGEMENT

David L. Dworkin joined the Company as its President and Chief Executive
Officer on March 24, 1993. Prior to joining the Company, he served as Chairman
and Chief Executive Officer of a London-based retailer, BhS, a division of
Storehouse, from November 1989 until July 1992, and as Group Chief Executive of
Storehouse from July 1992 until joining the Company in March of 1993. During
the time he was with BhS and Storehouse, BhS refocused its merchandise
assortment, strengthened its merchandising organization, remodeled 64 of its 137
stores and substantially reduced its supplier base. Mr. Dworkin has in excess
of 25 years experience in the retail industry, including service as President
and Chief Executive Officer of Bonwit Teller and President and Chief Operating
Officer of Neiman Marcus, then a division of the Company.

During his first year, David Dworkin has changed the senior management of
the Company and begun to reduce the number of management layers and increased
the senior level of communication within the organization. The Company hired
Gerald Mathews from Saks Fifth Avenue as Executive Vice President, Stores;
Elayne M. Garofolo from GFT USA Corp. as Executive Vice President, Marketing and
Sales Promotion; Patricia A. Warren from The Bon Marche as Executive Vice
President, Merchandising, Women's Apparel, Accessories, Intimate Apparel and
Shoes; and Robert J. Lambert from The Stride Rite Corporation, as Executive Vice
President, Human Resources. William J. Podany was appointed Executive Vice
President, Merchandising, Home, Men's and Cosmetics and Robert M. Menar was
promoted from Senior Vice President, Information Services to Executive Vice
President, Logistics and Information Services. In April 1994, the Company
announced the appointment of John C. Haeckel, previously a general partner at

Chilmark Partners, as Executive Vice President, Chief Financial Officer. This
appointment completes the Company's fully reorganized senior management team.

BUSINESS STRATEGY

INTRODUCTION

David Dworkin and the other senior executives have begun to implement a
long-term plan to improve store sales productivity and profitability, further
reduce operating expenses and identify other opportunities to increase the
profitability of the Company's business. The Company's sales per gross square
foot of $138 in 1993, were significantly below the department store industry
average and below the level achieved by the Company in fiscal 1989, $150 per
gross square foot. Similarly, the Company's operating profit margin (EBIT
margin) is well below the department store industry average. Management
believes an opportunity exists to improve financial performance with the
implementation of clear merchandising and operating strategies and the
investment of capital in its stores.

In mid-1993, the new management team developed a Mission Statement defining
the Company's target customer, merchandising focus and store identity.
Consistent with its Mission Statement, Management has developed specific
strategies that are intended to improve merchandise offerings, remodel the
stores, improve inventory management, refocus marketing efforts, improve the
selling culture and reduce costs.

IMPROVE MERCHANDISE OFFERINGS

The Company is engaged in significant reallocations of selling space
towards faster turning, higher profit core merchandise categories, which
represent the primary merchandise which attracts customers to the stores, and
away from slower turning, low profit categories. Other initiatives being taken
to improve the Company's merchandise offerings are described below.

- IMPROVE MERCHANDISE PROFITABILITY. The Company is increasing private-
label products across the merchandise spectrum. The Company will also
offer exclusive brand name product offerings by exploiting a
dramatically edited vendor base.

- EMPHASIZE VALUE PRICING. Management continues to refine its focused
pricing architecture which emphasizes value and quality. The Company
currently offers over 17% of its merchandise at every-day value
pricing and intends to merchandise approximately 20% of its product
offerings in this manner in the future.

- ENSURE MERCHANDISE FRESHNESS. The Company is progressing with its
plans to provide fresh merchandise by using a receipts-driven planning
process (the retail equivalent of just-in-time) which allows operation
with lower inventory levels, creating faster inventory turnover and
obviating the need for excessive markdowns to move dated merchandise.

To support the Company's new merchandising strategy, Management has
implemented a revised marketing and sales promotion strategy. This
new focused marketing strategy relies on the collection and usage of
demographic data on the Company's market areas obtained through the
proprietary credit card operations, the point-of-sale ("POS") data
base, independent data bases and both broad-based and focused market
research. The new sales promotion strategy focuses promotional
activity on key periods and specific events which complement, rather
than define, the core business.

REMODEL STORES

The Company has developed specific strategies to improve presentation of
merchandise assortments and to better communicate with its target customers.

- REALLOCATE AND REMODEL SELLING SPACE. Management is developing, on a
store-by-store basis, a program to reallocate space away from non-core
merchandise categories in favor of core merchandise. Management plans
to remodel a number of stores to more effectively allocate selling
space, increase selling square footage, improve merchandise
presentation and general store appearance and facilitate better
customer service.

The Company plans to spend approximately $336.0 million for store
modernization, selling space improvements and maintenance capital
expenditures through 1996. Over the next three years, the Company
intends to remodel/reallocate space within at least 40 of its 83
stores. The Company will first remodel those stores in which
Management believes capital expenditures can produce the greatest
return on investment through increases in sales productivity.

In fall 1993, the Company completed "quick-win" improvements in 58
stores at a cost of $17.4 million and invested an additional $12.5
million on fixtures to enhance merchandising and displays. These
improvements involve low cost upgrades, reallocation of selling space
without significant relocations of fixtures and walls and installation
of additional vendor shops. The "quick win" strategy was designed to
allow the Company's sales and profits to benefit from actions which
involve relatively modest capital investment and that could be
implemented prior to formal store remodeling. See "Company Operations
Store Remodeling."

The Company has created a model store space distribution floor plan in
concert with its merchandising strategy. This space
redistribution/remodel plan will be the foundation of the capital
expenditure program and will be implemented in the Company's stores
over the next three years.

IMPROVE INVENTORY MANAGEMENT

The Company has begun to tailor merchandise assortments to its stores and
develop more effective partnerships with its vendors. Management believes these
actions will increase the freshness of merchandise assortments, improve store
sales and inventory turnover and reduce markdowns.

- UTILIZE PLANNER-DISTRIBUTOR DEPARTMENT. The Company's planner-
distributor department ("P&D Department") works closely with the
Company's buying organization to improve the allocation and
distribution of inventory to the Company's stores. The P&D Department
analyzes demographic and market research data, as well as data on
customer buying patterns captured through the Company's proprietary
credit card system, to tailor merchandise assortments for individual
stores. Management believes the P&D Department can provide the
Company an advantage over large national department store chains with
standardized merchandising. The tailoring of merchandise presents a
particular marketing opportunity in California and the Southwest given
the ethnic diversity of these regions. See "Company Operations --
Merchandising and Planner-Distributor Organizations."

- REDUCTION OF VENDORS. The Company has reduced the vendor base by 40%,
with ongoing purchases consolidated in the remaining vendors.
Management believes this reduction will increase the Company's
importance to its remaining vendors.

- INVENTORY LEVEL REDUCTION/FOCUS ON RECEIPT FLOW AND GROSS MARGIN
RETURN ON INVESTMENT. The Company has increased vendor participation
in its quick response inventory replenishment program to reduce
purchase lead time, maintain a faster and more continuous merchandise
flow and facilitate automatic replenishment of staple items.
Automatic replenishment and cooperative supply arrangements enhance
efficiency and drive down both inventory levels and costs. By
coupling this approach to on-hand stock reduction with automatic
markdown programs to clear-out slow moving items, Management will be
able to simultaneously cut the investment in inventory and speed up
the turnover of merchandise on the selling floor. Management intends
to improve the efficiency of inventory through a new focus on receipt
flow, gross margin return

on investment and timely markdowns. Management believes this focus
has already resulted in an improvement in the aging of the Company's
inventory and a reduction in the weeks of supply on hand.

REFOCUS MARKETING EFFORTS

The Company has refocused its marketing efforts to create a research-based
marketing strategy that is fully integrated with both the merchandising and
store operation functions. To implement this strategy, the Company has created
a customer database through the use of both proprietary internal information and
externally available information which enables the Company to identify its
customer base and to tailor its marketing and merchandising strategy to reach
its core customer. The Company is using its market research to determine ways
to communicate with the customer and enhance the shopping environment.
Additionally, the Company is pursuing a strategy of marketing to the ethnically
diverse population of California and the Southwest through the use of targeted
marketing programs and bilingual sale associates, signage and advertising. The
Company is redirecting its marketing to provide a more focused image and
communicate the changes underway.

IMPROVE STORE SELLING CULTURE

The Company is revitalizing its selling culture. This new customer-driven
culture focuses on improving productivity by reallocating store personnel and
providing an enhanced shopping environment. In order to accomplish these goals,
the Company is recruiting talented store personnel, improving customer service
and sales training, and redesigning the compensation structure to align more
closely the sales associates' incentives with the customer service goals.

REDUCE COSTS

The consolidation of operations to date has significantly reduced the
Company's expense infrastructure. In September 1993, the Company completed an
Activity Value Analysis ("AVA") program. This program was designed to evaluate
the importance and value of each of its areas of operation and identify
duplicative and low value-added functions, potential staff reductions and other
actions which improve efficiency. This review yielded more than 1,500 cost-
saving ideas and identified approximately $40.0 million of annual expense
reductions. The Company began implementing these measures during 1993,
resulting in cost savings of approximately $7.0 million. Additional annualized
cost savings of $30.0 million and $3.0 million are expected to be realized from
the program during fiscal 1994 and 1995 respectively.

COMPANY OPERATIONS

INTRODUCTION

The Company's stores presently operate under the names The Broadway,
Emporium and Weinstocks. All support functions have been centralized, resulting
in the elimination of many duplicate support functions. Management, marketing
and sales promotion, merchandising and administrative functions (other than
accounts payable and proprietary credit card operations, which are consolidated
in Tempe, Arizona, and data processing operations, which are consolidated in
Anaheim, California) are all located at the Company's corporate offices in Los
Angeles, California.

Forty-one Broadway stores are spread over a seven-county area in Southern
California extending from Bakersfield and Santa Barbara in the North to San
Diego in the South. The Company's twenty-two Emporium stores are located
predominantly in the San Francisco Bay area. Of The Company's nine Weinstocks
stores, eight are located in the Sacramento and Central Valley region of
California, and one in Reno, Nevada. The eleven non-California Broadway stores
are located in Arizona, Colorado, Nevada and New Mexico.

A significant number of the Company's Southern California stores suffered
damage as a result of the major earthquake which affected that area on January
17, 1994. While most of the area stores were reopened within two weeks, as of
April 25, 1994, four stores remained closed for repairs (Panorama City, Topanga
Plaza, Northridge Fashion Center and Sherman Oaks Fashion Square). The Topanga
Plaza and Panorama City stores are due to reopen in early June 1994. Two floors
of the Sherman Oaks store are scheduled to open in late June 1994 with the third
floor due to open by October 1994. The Northridge Store is projected to reopen
prior to yearend. The Company maintains earthquake and business interruption
insurance with standard deductible provisions that require the Company to incur
an initial level of costs at each location subject to damage or interruption of
business. In January 1994, the company established a reserve of $65.4 million
to cover costs of building and fixture repairs, inventory and business
interruption losses, and other costs related to the earthquake. In addition, a
$50.4 million receivable was established for estimated insurance recoveries
resulting in a $15.0 million non-recurring charge being recognized for
earthquake related losses in excess of estimated insurance proceeds. As of year
end, $17.1 million of the reserve had been utilized, largely to cover damaged
inventories. During the period January 30, 1994 through April 25, 1994,
insurance recoveries totalling $21.2 million were received by the Company.

During the past five years, one California Broadway store was opened and
three stores were closed. In addition, one store was opened and one store was
closed in Arizona. In January 1993, the Company closed three Weinstocks stores
located in Utah. No Emporium stores were opened or closed in the past five
years. The following table summarizes the number of stores opened and closed
during the period July 31, 1988 through January 29, 1994 (excluding stores of
the Thalhimers subsidiary, sold in December 1990).

NUMBER OF NUMBER OF
STORES OPEN STORES OPEN
AT BEGINNING STORES STORES AT END
PERIOD OPENED CLOSED OF PERIOD
------------ ------- ------- ----------

52-week period ended January 29, 1994. . . . . . 83 -- -- 83
17-week period ended January 30, 1993. . . . . . 87 -- 4 83
35-week period ended October 3, 1992 . . . . . . 88 -- 1 87
52-week period ended February 1, 1992. . . . . . 89 -- 1 88
26-week transition period ended February 2, 1991 89 1 1 89
53-week period ended August 4, 1990. . . . . . . 88 1 -- 89
52-week period ended July 29, 1989 . . . . . . . 88 -- -- 88

The Company intends to aggressively manage its portfolio of stores by
identifying and closing, if necessary, underperforming stores, as well as
identifying opportunities to open new stores.

Average sales per gross square foot were $138 in 1993 and $137 in 1992.
Excluding automotive center sales for both periods the average sales per square
foot were $140 in 1993 and $138 in 1992. The collective average sales per
square foot for stores outside of California were not significantly different
than the collective average for California stores.

PROPERTIES

The location, year of opening, approximate gross square footage, initial
lease or current renewal option expiration date (or a notation that a store is
owned by the Company), and, for leased stores with additional renewal option
periods, the final renewal option expiration date, in each case as of April 25,
1994, are set forth below. All stores listed are in California unless otherwise
noted.

APPROXIMATE
GROSS LEASE
YEAR SQUARE EXPIRATION
NAME LOCATION OPENED FOOTAGE DATE(1)
- - ---- -------- ------ ----------- ----------

THE BROADWAY
(CALIFORNIA STORES)
Baldwin Hills Los Angeles 1947 213,500 Owned-2042(2)
Panorama City(4) Panorama City 1955 217,000 Owned
Los Altos Center Long Beach 1956 147,000 Owned
Del Amo Torrance 1959 220,500 Owned
Whittwood Mall Whittier 1961 141,000 2006/2021
Grossmont Shopping Center La Mesa 1961 158,000 2015
West Covina Fashion Plaza West Covina 1962 142,000 Owned
Chula Vista Center Chula Vista 1962 201,500 Owned
Buena Ventura Plaza Ventura 1963 157,500 1994/2060
Topanga Plaza(4) Canoga Park 1964 170,000 Owned
Century City Los Angeles 1964 234,000 1995/2055
Stonewood Shopping Center Downey 1965 160,000 Owned-2051(2)
Huntington Center Huntington Beach 1965 160,000 1996/2064
Inland Center San Bernardino 1966 150,000 Owned
Valley Plaza Bakersfield 1967 150,000 1998/2065
Fashion Island Newport Beach 1967 178,500 Owned-2003/2063(2)
Montclair Plaza Montclair 1968 150,500 Owned
Fashion Valley San Diego 1969 183,000 Owned-2005/2068(2)
Tyler Mall Riverside 1970 163,000 2001/2045
Mall of Orange Orange 1971 165,500 Owned-2007/2067(2)
Cerritos Center Cerritos 1971 183,000 2002/2062
Northridge Fashion Center(4) Northridge 1971 183,000 2002/2062
Plaza Los Angeles 1973 262,000 2010/2070
Puente Hills City of Industry 1974 161,500 2004/2067
Santa Anita Arcadia 1974 197,500 2009/2038
Laguna Hills Laguna Hills 1975 165,000 2006/2050-2014/2072(3)
Fox Hills Culver City 1975 197,000 2005/2070
Glendale Galleria Glendale 1976 191,000 Owned-2031/2051(2)
Hawthorne Plaza Hawthorne 1977 164,000 2007/2040
Sherman Oaks Fashion Square(4) Sherman Oaks 1977 187,500 Owned
La Jolla San Diego 1977 159,500 Owned
The Oaks Thousand Oaks 1978 162,000 Owned
Brea Brea 1978 154,500 2008/2041
Plaza Camino Real Carlsbad 1979 155,500 2011/2039
Pasadena Plaza Pasadena 1980 158,500 2010/2045
Santa Monica Place Santa Monica 1980 154,000 2012/2040
La Cienega Los Angeles 1982 162,500 2017/2027
Horton Plaza San Diego 1985 135,000 2020/2060
North County Fair Escondido 1986 151,500 Owned-2022/2041(2)
South Coast Plaza Costa Mesa 1986 206,500 2021/2051
Paseo Nuevo Santa Barbara 1990 143,000 Owned-2064(2)
---------
TOTAL STORES = 41 TOTAL GROSS SQUARE FOOTAGE 7,096,500
---------

APPROXIMATE
GROSS LEASE
YEAR SQUARE EXPIRATION
NAME LOCATION OPENED FOOTAGE DATE(1)
- - ---- -------- ------ ----------- ----------

THE BROADWAY - CONTINUED
(NON-CALIFORNIA STORES)
Boulevard Las Vegas, Nevada 1966 147,000 Owned-2062(2)
Biltmore Fashion Park Phoenix, Arizona 1968 152,500 Owned-2000/2043(2)
Los Arcos Scottsdale, Arizona 1969 165,500 Owned
Metrocenter Phoenix, Arizona 1973 161,000 2005/2070
Park Mall Tucson, Arizona 1974 161,500 2005/2050
Coronado Center Albuquerque, New Mexico 1976 162,500 2006/2057
Meadows Las Vegas, Nevada 1978 158,000 2008/2041
Fiesta Mall Mesa, Arizona 1979 137,900 2010/2040
Tucson Mall Tucson, Arizona 1982 137,500 Owned-2017/2076(2)
Westminster Westminster, Colorado 1986 135,000 Owned
Paradise Valley Paradise Valley, Arizona 1991 183,500 Owned
--------
TOTAL STORES = 11 TOTAL GROSS SQUARE FOOTAGE 1,701,900
---------

EMPORIUM
(CALIFORNIA STORES)
Downtown San Francisco 1896 428,700 Owned
Oakland Oakland 1929 380,400 Owned
Stonestown San Francisco 1952 287,000 Owned
Walnut Creek Walnut Creek 1954 187,000 2005/2035
Stanford Palo Alto 1956 231,000 Owned-2004/2053(2)
Valley Fair Santa Clara 1957 259,000 Owned
El Cerrito El Cerrito 1957 237,500 Owned
Hillsdale San Mateo 1962 220,500 Owned-2012/2061(2)
Marin San Rafael 1964 268,500 2012/2061-2012/2061(3)
Santa Rosa Santa Rosa 1966 213,500 2002/2062
Almaden San Jose 1968 216,500 2015/2064
Mt. View Mt. View 1970 207,000 1995
Northridge Salinas 1972 179,000 Owned-2071(2)
Tanforan San Bruno 1972 199,500 2003/2063
Hilltop Richmond 1976 203,500 2006/2066
Eastridge San Jose 1978 180,000 2006/2046
Stoneridge Pleasanton 1980 172,000 2012/2040
Sun Valley Concord 1981 181,000 2006/2046-2014/2061(3)
Solano Fairfield 1983 150,000 Owned
Southland Mall Hayward 1983 178,500 2007/2027
Vallco Cupertino 1984 181,000 Owned-2001/2061(2)
Newpark Newpark 1987 182,000 Owned
--------
TOTAL STORES = 22 TOTAL GROSS SQUARE FOOTAGE 4,943,100
---------

WEINSTOCKS
(CALIFORNIA STORES EXCEPT FOR
RENO, NEVADA STORE)
Country Club Plaza Sacramento 1961 162,500 Owned
Arden Fair Sacramento 1961 190,900 Owned
Stockton Stockton 1966 130,500 Owned-1997/2057(2)
Reno Reno, Nevada 1967 150,000 1998/2066
Florin Sacramento 1967 150,000 Owned
Fresno Fresno 1970 163,000 2006/2067
Sunrise Sacramento 1972 163,000 2003/2066
Modesto Modesto 1977 161,500 2007/2040
Downtown Plaza Sacramento 1979 163,900 2011/2039
--------
TOTAL STORES = 9 TOTAL GROSS SQUARE FOOTAGE 1,435,300
---------

GRAND TOTAL STORES = 83 TOTAL GROSS SQUARE FOOTAGE(5) 15,176,800
-----------
-----------
<FN>

(1) Initial lease or current renewal option expiration date and, for stores
with additional renewal periods, the final renewal option expiration date,
respectively.
(2) Owned building subject to ground lease expiring in the years indicated.
(3) Building and ground lease expiration dates, respectively.
(4) Stores which, as of April 25, 1994, remain closed as a result of the
January 17, 1994 Northridge earthquake.
(5) Includes approximately 200,000 square foot relating to automotive centers.

OTHER FACILITIES

The Company operates distribution facilities in Los Angeles and Union City,
California, and Tempe, Arizona. Information services and data processing support
are centralized in a facility located in Anaheim, California. Credit card and
accounts payable administrative functions are provided from an administrative
center located in Tempe, Arizona. All management, marketing and sales
promotion, distribution networks, merchandising departments, and support
functions are located at the Company's Los Angeles Corporate offices.

STORE REMODELING

The Company's store remodeling program is designed to increase the
available selling space within existing stores and make more productive use of
the existing selling space through the reallocation of space in favor of
apparel, accessories, cosmetics and soft home goods, categories of merchandise
which generally turn faster, have higher gross margins and constitute the
Company's core merchandise. The Company's store remodeling program has a "quick
win" component and a longer-term component.

"QUICK WIN" REMODELING. Management has completed "quick win" minor
adjustments in selling space allocation and appearance in 58 stores at a cost of
$17.4 million. These improvements involve low-cost upgrades and the favorable
reallocation of selling space to the extent possible without relocating
significant fixtures or walls. Many of these improvements also involved the
installation of vendor shops or updated fixtures, which are typically partially
paid for by the vendor but operated by the Company. A vendor shop is a custom
display area dedicated to a specific vendor. Such shops are generally jointly
designed by the vendor and the Company and create a physical identity for the
vendor in the store. In 1992, 212 such vendor shops were opened and 252
additional vendor shops have been opened during 1993.

LONG-TERM REMODELING. The Company has targeted approximately 40 stores for
remodeling by 1996. Stores are being selected for remodeling based primarily on
sales potential, demographic trends and expected return on investment. Over the
next three years the Company plans to spend approximately $336.0 million on
capital expenditures, with spending on store modernization and selling space
improvements expected to be $276.0 million after contributions from developers
and landlords, and maintenance capital expenditures of $60.0 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Capital Expenditures."

The Company's long-term remodeling plan contemplates three different types
of remodeling: major remodeling, which involves the total refitting of a store,
including the reallocation of selling space, the relocation or replacement of
significant interior walls and fixtures and the realignment of selling
departments to place complimentary merchandise offerings in closer proximity
with each other so as to stimulate cross-shopping and cross-selling
opportunities; moderate remodeling, in which selling space would be reallocated,
selling departments would be realigned, significant interior walls and fixtures
would be relocated or replaced and signage, lighting, carpeting and wall
covering would be changed to upgrade the store's appearance; and minor
remodeling, in which signage, lighting, carpeting and wall covering changes
would be made to upgrade the store's appearance, but no space reallocation would
occur. In addition, the Company plans to expend money for vendor shops and
general upgrading and maintenance of fixtures and merchandise presentation in
its stores.

These store remodeling activities will generally be carried out over an
extended period between peak selling seasons. Management believes that the
Company will realize substantial long-term benefits from the remodeling program.
Moreover, Management believes that the remodeling program will be implemented in
a way that should avoid any material adverse impact on sales in the short term.

MERCHANDISE ASSORTMENT

The Company's stores carry a broad merchandise assortment of apparel,
shoes, cosmetics, accessories and home products such as tabletop and housewares,
domestic items, furniture and floor coverings and electronics.

The Company is de-emphasizing certain slow-turning or low margin
merchandise, such as furniture

and electronics, and is placing more emphasis on women's and men's apparel and
accessories, cosmetics, women's shoes and soft home goods (such as tabletop and
housewares and domestic items), which constitute the Company's core merchandise
categories. See "Business Strategy -- Improve Merchandise Offerings."

During 1993, approximately 9% of store retail space (other than space
leased for automotive centers) was leased to outside vendors operating stand-
alone departments within each store. Leased departments included the shoe and
jewelry departments in each store and the automotive departments at certain
store locations. The independent operators supply their own merchandise and
sales personnel, contribute to advertising and pay the Company a percentage of
gross sales as rent. These departments (including automotive centers) accounted
for approximately 9.9% of the Company's total sales for the year ended January
29, 1994. The Company's automotive centers were converted to a third party
operation in September 1993. In addition the shoe business will be converted
from a leased operation to an owned operation in May 1994.

In connection with the refocusing of the Company's merchandise assortments,
the Company intends to carefully review the merchandise offerings of its leased-
space vendors to ensure that they appeal to the Company's target customers and
are consistent in terms of price, quality, assortment and fashion with the
Company's merchandise offerings in its other departments.

CONSOLIDATION OF OPERATIONS

The Company has undertaken a significant series of programs over the past
few years to consolidate its operating divisions and reduce its expenses. In
the Fall of 1990, the Company sold Thalhimers, its only East Coast retailing
subsidiary. As of January 1991, the Company operated its stores through four
separate divisions, each with separate management, administrative, marketing and
sales promotion functions. In April of 1991, the Company consolidated its
Weinstocks and Emporium divisions. In January of 1992, the Company consolidated
the Broadway-Southwest division into the Broadway-Southern California division.
Finally, in April of 1992, the Company consolidated its Emporium Weinstocks
division into its Broadway division, forming a single operating unit based in
Southern California. Management believes that the divisional consolidations
have resulted in cost savings of approximately $30.0 million per year.

With the consolidation of the Company's store operations, the Company
consolidated its proprietary credit card and accounts payable operations into a
single administrative center located in Tempe, Arizona, which the Company
estimates has resulted in an estimated annual cost savings of approximately $6.0
million compared to the costs incurred in the year prior to the filing of the
chapter 11 petition. In addition, the Company has downsized its Anaheim,
California data processing operation, reducing employment from approximately 530
full-time employee equivalents to approximately 330 full-time employee
equivalents. Management estimates that this downsizing has reduced annual data
processing costs by approximately $17.0 million. The consolidation of its
operating divisions described above also reduced the requirements for separate
distribution and warehouse facilities, permitting the closure of two warehouses
in the San Francisco and Sacramento areas. As of April 1993, the Company began
operating its Broadway Southern California and Broadway Southwest stores under
the name "The Broadway".

In connection with the chapter 11 proceedings, the Company negotiated
reductions in rental rates and common area charges under many of its real
property leases and related agreements, which the Company estimates has resulted
in annual cost savings of approximately $6.0 million compared to the amounts
paid for the year prior to the bankruptcy filing. The Company also renegotiated
many of its equipment leases. As a result, rental charges under the Company's
equipment leases have been reduced by approximately one-third, which the Company
estimates has yielded annualized cost savings of approximately $9.0 million
compared to the amounts paid for the year prior to filing for bankruptcy.

MERCHANDISING AND PLANNER-DISTRIBUTOR ORGANIZATIONS

With the consolidation of its divisions, buying activities were centralized
for the Company's 83 stores. The centralized buying organization facilitates
the editing of assortments and reduction in the number of vendors and increases
the importance of the Company to its key vendors. The centralized buying
function has enabled the Company to improve the overall quality of its buying
staff, increase the depth and

specialization of buyers dedicated to its merchandise categories, and improve
the consistency and coordination of the buying process.

In 1992, in conjunction with the consolidation of the Company's operating
divisions, the Company established the P&D Department to work closely with its
buying organization and improve the allocation and distribution of inventory to
the Company's stores. The P&D Department synthesizes demographic and market
research along with data on current sales performance for each market served by
the Company. Using this information, the P&D Department works closely with the
buyers in the Company's merchandising department to determine the appropriate
merchandise mix for each store, specifying the appropriate styles, colors and
sizes to be provided, the timing for delivery and the quantity of goods to be
delivered. In determining the merchandise mix for a particular store, the P&D
Department takes into account local differences in lifestyle and ethnic
background, seasonal differences and other factors.

MANAGEMENT INFORMATION SYSTEM

Management believes that its internally developed MIS System is among the
most advanced in the department store retailing industry. Management believes
its systems capability will play an important role in the implementation of its
business strategy. The MIS System provides detailed information that enables
Management to monitor the effectiveness of merchandise strategies, improve
merchandise assortments and reduce inventory costs. The MIS System capability
fully supports its efforts with vendors to shorten lead times and manage the
level of merchandise shipments received based on most recent sales trends.

The Company's information services facility provides data processing,
systems development and communication services to all of the Company's stores,
headquarters and distribution and support facilities. The MIS System provides
fully integrated voice and data communication links to its point-of-sale
terminals, computer systems and telephone system. The system currently provides
sophisticated inventory tracking and control for more than 800,000 stock-keeping
units and has the capacity to track 2 million units. The system also provides
automatic inventory replenishment of selected inventory items using computer-
generated purchase orders, and links the Company with more than 160 vendors
through an interactive electronic communications network. In addition, the MIS
System's price management system allows daily updating of merchandise prices
(either store-by-store or Company-wide) and provides on-line price-lookup
capability at the point-of-sale register. All of the major components of the
MIS System are protected from major systems failures through the MIS System's
architecture, as well as through an arrangement with a leading provider of back-
up information systems. Management believes that the Company's MIS System will
continue to play a central role in the execution of the Company's merchandising
strategy and the ongoing containment of inventory and operating costs.

COMPETITION

The retail industry, in general, and the retail department store business,
in particular, are intensely competitive with respect to the purchase and sale
of merchandise and the acquisition of desirable store locations. Significant
competitors of the Company include Robinsons-May, Bullock's, Macy's, Nordstrom,
Mervyn's, J.C. Penney, Dillard's and Gottschalks, though not all of these other
competitors have stores in each market in which the Company competes. Each
store competes not only with other traditional department stores, but also with
specialty stores, discount stores, off-price retailers and numerous other types
of local retail outlets selling apparel and accessories, electronics, furniture,
and home furnishings. The Company also competes with various retailers that
offer merchandise by mail order. Additionally, in the future, companies that
offer merchandise to consumers via television may become more significant
competitors of the Company. Many factors enter into the competition for
consumers' patronage, including service, price, quality, style, product mix,
convenience and credit availability. Each of the Company's stores has at least
one department store competitor nearby. Some of the retailers with which the
Company competes have substantially greater financial resources than the
Company.

EMPLOYEES

As of January 29, 1994, the Company employed approximately 23,000
associates, of whom approximately 12,000 were then employed on a full-time
basis, subject to seasonal increases in the number of sales associates during
the holiday season. The Company has union contracts covering approximately

three and one-half percent of the associates of the Company, primarily in two
Emporium stores located in San Francisco. The Company believes that it has good
relations with its associates.

SERVICE MARKS

The service marks "The Broadway," "Emporium," and "Weinstocks" have been
registered with the United States Patent and Trademark Office. The Company also
has rights to several other marks. The Company also uses several trademarks and
service marks in connection with certain of its private-label brand merchandise.
Except for the aforementioned service marks as applied to the retail
merchandising of goods and services, the Company does not believe that there are
any patents, licenses, trademarks and service marks that are material to its
business.

PROPRIETARY CREDIT CARD OPERATIONS

Customers may purchase merchandise at any of the Company's stores for cash,
with certain common third-party credit or charge cards, or on credit in
accordance with revolving credit account terms provided by the Company through
its own proprietary credit card operations. In addition to providing a source
of credit that customers may use to make purchases at Company stores, these
programs generate a significant body of marketing data related to customers'
tastes and buying patterns. Demographic and purchasing information available as
a result of the proprietary credit card program provides Management with a
valuable tool to analyze customer demographics and shopping patterns. The
Company uses this information to provide specific customers with information
about merchandise or events that would be of particular interest to them based
on their historical shopping patterns.

In the year ended January 29, 1994 proprietary credit card sales accounted
for 51.7 percent of gross sales. In recent years, the Company's proprietary
credit card sales have declined while third-party credit card sales have been
increasing. The Company believes that this is due to the broader utility of
third-party credit and stronger marketing and expanded availability of third-
party credit. The Company continually evaluates the effectiveness of various
credit-promotion programs to maximize proprietary credit card sales volume
consistent with the Company's credit standards. For example, the Company has
developed a preferred proprietary credit card. Under this preferred credit card
program, customers are offered special incentives designed to stimulate
proprietary credit card purchases.

Effective October 1993, changes in the terms of the Company's revolving
charge accounts reduced the minimum monthly payment requirement on the short-
term accounts from 10% of the outstanding balance to 5%. As a result of the
change in terms, the long-term, Homemaker accounts are being phased out. This
change is expected to result in increases in customer receivable balances
outstanding and corresponding finance charge revenue gains.

The following tables reflect selected proprietary credit operations data:

Average
Number of Credit Balance
Billed Number of Days Credit per Billed
As of Accounts Sales Outstanding Account
------- -------- --------------------- --------------

January 29, 1994 . . . . . . 3,347,000 148 $ 164
January 30, 1993 . . . . . . 3,184,000 138 168
February 1, 1992 . . . . . . 3,660,000 146 157

The Company's average accounts receivable balances during the years ended
January 29, 1994, January 30, 1993, and February 1, 1992 were $520.7 million,
$532.6 million, and $580.9 million respectively. During these periods, the
Company's finance charge revenue decreased from $94.0 million in 1991 to $81.4
million in 1993. Management believes that the decrease in the Company's finance
charge revenue in recent years is due to the decrease in the size of the
Company's accounts receivable during the same period, attributable to lower
proprietary credit sales and accelerated customer repayments. Seasonal customer
purchasing in November and December produces an increase in credit purchases.
As a result, customer receivable balances outstanding and the number of accounts
with unpaid balances normally reach their highest levels in the months of
December and January.

Customer receivables are generally written-off when the aggregate of
payments made in the last six months is less than one full scheduled monthly
payment, or when it is otherwise determined that the account is uncollectible.
Proprietary credit card sales, net write-offs with respect thereto, and customer
receivable balances for the period indicated were as follows (excluding
Thalhimers' data):

Credit Sales Net Write-Offs
-------------------------- ---------------------
Total
% of % of Customer
Fiscal Year Ended Amount Gross Sales(1) Amount Credit Sales Receivables
----------------- ------ -------------- ------ ------------ -----------
(dollar amounts in thousands)

January 29, 1994 . . . . . . . . . . . . . . $ 1,183,002 51.7% $ 29,621 2.5% $ 578,308
January 30, 1993 . . . . . . . . . . . . . . 1,222,205 52.3 36,687 3.0 580,542
February 1, 1992 . . . . . . . . . . . . . . 1,252,843 53.8 38,503 3.1 598,562
February 2, 1991
(26 weeks ended) . . . . . . . . . . . . . 812,424 56.3 17,719 2.2 673,478
August 4, 1990 . . . . . . . . . . . . . . . 1,497,508 56.7 35,186 2.3 589,705
July 29, 1989. . . . . . . . . . . . . . . . 1,527,104 58.6 20,809 1.4 596,364

- - ----------------------
<FN>
(1) Proprietary credit card sales as a percent of total sales inclusive of
related sales tax receipts.

Current year write-offs at 2.5% of credit sales improved from 3.0% for the
52 week period ended January 30, 1993, reflecting improved collections and a
decrease in the level of personal bankruptcies experienced in the prior year.

In addition, the Company's proprietary credit cards are subject to federal
and state regulation, including consumer protection laws, that impose
restrictions on the making and collection of consumer loans and on other aspects
of credit card operations. During 1991, several legislative initiatives were
proposed to Congress which, had they been successful, would have had the effect
of imposing a ceiling on the interest rate that could be charged on credit card
accounts. There can be no assurance that the existing laws and regulations will
not be amended, or that new laws or regulations will not be adopted, in a manner
that could adversely affect the Company's proprietary credit card operations.

RECAPITALIZATION

On February 11, 1991, the Company filed a voluntary petition for relief
under chapter 11 of the United States Bankruptcy Code (The "Bankruptcy Code") in
the United States Bankruptcy Court for the Central District of California (the
"Bankruptcy Court"). During the bankruptcy proceedings, the Company managed its
affairs and operated its business as debtor in possession under the supervision
of the Bankruptcy Court while it developed a reorganization plan to restructure
the Company. The Company emerged from bankruptcy pursuant to a plan of
reorganization ("POR") on October 8, 1992 (the "Emergence Date"). Since the
Emergence Date, the Company has operated independently, although the Bankruptcy
Court has retained jurisdiction over certain claims and other matters relating
to the POR. See "Item 3. Legal Proceedings -- Chapter 11 Proceedings;
Unresolved Claims."

Pursuant to the POR, as of the Emergence Date, the Company's largest
secured creditors and certain other secured creditors agreed to extend the
maturities and adjust the prospective interest and payment terms for loans
totaling $451.8 million and capitalize $66.1 million of interest accrued thereon
during the chapter 11 proceedings. In addition, the Company negotiated
significant reductions in lease payments and common area charges under its
equipment and real property leases. While the bankruptcy proceedings were
pending, Zell/Chilmark acquired via tender offer approximately $461.0 million of
the $600.0 million in unsecured claims against the Company, making Zell/Chilmark
the Company's largest unsecured creditor. Pursuant to the POR, these unsecured
claims were converted into equity. In addition, Zell/Chilmark and First Plaza
were each issued 2,500,000 shares of common stock in exchange for a cash equity
infusion totaling $50.0 million. As a result, Zell/Chilmark held approximately
70% of the shares of Common Stock outstanding as of the Emergence Date.

Pursuant to the POR, holders of the Company's common stock, $.01 par value,
outstanding prior to the Emergence Date ("Old Common Stock") received .081
shares of Common Stock and .084 Warrants (or, in the case of participants in the
profit sharing plan in effect prior to the Emergence Date with respect

to shares of Old Common Stock held by such plan and other holders of Old Common
Stock who so elected, .081 shares of Common Stock and .084 shares of Preferred
Stock).

As of the Emergence Date, the existing debtor-in-possession working capital
facility and the receivables based financing arrangement were replaced with new
three-year facilities, the Credit Facility and the Receivables Facility.
Subject to collateral limitations, the new facilities provide for up to $225.0
million under the Credit Facility and up to $575.0 million to finance the
Company's proprietary credit card receivables portfolio.

For additional information related to the financial obligations of the
Company and the financial impact of the bankruptcy proceedings on the operations
of the Company's business, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."

EXECUTIVE OFFICERS OF THE COMPANY

The following is a list of names and ages of all of the current executive
officers of the Company indicating all positions and offices with the Company
held by each such person, each such person's principal occupations or employment
during the past five years, and the expiration of each such person's term of
office.

Term
Name Age Office Expiration(1)
------- ----- --------- ------------------

David L. Dworkin 50 President, Chief Executive Officer
and Director March 23, 1996
Elayne M. Garofolo 47 Executive Vice President, Marketing and
Sales Promotion May 23, 1996
John C. Haeckel 35 Executive Vice President,
Chief Financial Officer April 3, 1997
Robert J. Lambert 40 Executive Vice President, Human
Resources December 1, 1996
Gerald J. Mathews 53 Executive Vice President, Stores April 30, 1996
Robert M. Menar 56 Executive Vice President, Logistics and
Information Services July 20, 1995
William J. Podany 47 Executive Vice President, Merchandising,
Home, Men's and Cosmetics July 20, 1995
Patricia A. Warren 46 Executive Vice President, Merchandising,
Women's Apparel, Accessories,
Intimate Apparel and Shoes May 23, 1996
Marc E. Bercoon 33 Senior Vice President, General Counsel
and Secretary (2)
<FN>

(1) The Company has entered into employment contracts with those individuals
with the term expirations indicated.
(2) Marc Bercoon serves at the pleasure of the Board of Directors.

David L. Dworkin joined the Company as its President and Chief Executive
Officer on March 24, 1993. He also became a Director at that time. Prior to
joining the Company, he served as Chairman and Chief Executive Officer of
London-based retailer BhS, a division of Storehouse, from November 1989 until
July 1992, and as Group Chief Executive of Storehouse from July 1992 until
joining the Company in March of 1993. He has in excess of 25 years experience
in the retail industry, including service as President and Chief Executive
Officer of Bonwit Teller, Inc., from 1988 through 1989, and President and Chief
Operating Officer of Neiman Marcus from 1984 through 1988, then a division of
the Company.

Elayne M. Garofolo was appointed Executive Vice President, Marketing and
Sales Promotion in May 1993. From 1991 to 1993, she served as Senior Vice
President, Communications and Image of GFT USA Corp. From 1981 to 1990, she
served as Senior Vice President of Marketing and Sales Promotion of Bonwit
Teller, Inc.

John C. Haeckel was appointed Executive Vice President and Chief Financial
Officer in April 1994. From 1984 to March 1994 he was with Chilmark Partners, a
merchant banking firm, serving as a general partner from 1987. Since October
1993, while still with Chilmark Partners, he served the Company as a consultant
on financial matters. Chilmark Partners has an interest in the Zell/Chilmark
Fund, L.P. which owns 54.4% of the Company's outstanding common stock as of
April 25, 1994.

Robert J. Lambert was appointed Executive Vice President, Human Resources
in January 1994. From 1990 to 1993 he served as chief human resources officer
at The Stride Rite Corporation and from 1981 to 1990 he was with Pepsico Inc.,
most recently as director of personnel resources - Pepsico West.

Gerald J. Mathews was appointed Executive Vice President, Stores in May
1993. From 1976 through 1992, he served as Executive Vice President, Stores of
Saks Fifth Avenue.

Robert M. Menar was appointed Executive Vice President, Logistics and
Information Services in October 1993. Prior to that time, he served in various
positions since joining the Company in 1978, most recently serving as Senior
Vice President, Information Services.

William J. Podany was appointed Executive Vice President, Merchandising,
Home, Men's and Cosmetics in April 1993. From February 1992 to April 1993, he
served as Vice Chairman - Merchandise. He served as Senior Vice President,
General Merchandise Manager - Home of Thalhimers from 1989 to 1992. He served
as Senior Vice President, General Merchandise Manager of Sibley from 1987 to
1989.

Patricia A. Warren was appointed Executive Vice President, Merchandising,
Women's Apparel, Accessories, Intimate Apparel and Shoes in May 1993. From 1989
to 1993, she served as Senior Vice President, General Merchandising Manager of
The Bon Marche. From 1986 to 1989, she served as Executive Vice President of
the Broadway Southwest.

Marc E. Bercoon was promoted to a Senior Vice President of the Company in
February 1994, and has served as General Counsel and Secretary of the Company
since February 9, 1993. He served as Legal Counsel and Assistant to the Vice
Chairman of the Company from October 1992 to February 1993. From January 1990
to October 1992, he was Vice President and General Counsel of Equity Properties
and Development Company, a division of Equity Property Management Corp. From
July 1987 to January 1990, he was in private practice as a corporate and real
estate attorney at Rosenberg and Liebentritt, P.C., a Chicago-based law firm.

ITEM 2. PROPERTIES

As of January 29, 1994, 24 of the Company's stores were owned, 16 were
owned subject to ground leases and 43 were leased. Three of these leased stores
are subject to separate ground and improvement leases. As of January 29, 1994,
the total annual base rent due under the store leases is approximately $22.0
million. In addition to the base monthly rent, the Company is obligated under
many of the leases, or under related agreements discussed below, for a portion
of common area maintenance charges and real property taxes. Further, the
Company is lessee under eleven other leases relating to various offices,
distribution facilities, and parking facilities. As of January 29, 1994, the
total annual base rent due under these additional leases is approximately $1.0
million. Leases are generally for periods of up to 30 years, with renewal
options for substantial periods. Such leases are generally at fixed rental
rates, except that certain leases provide for additional rental payments based
on sales in excess of predetermined levels.

Since many of the Company's stores are located in regional shopping
centers, the Company is also party to other agreements which are inextricably
tied to the Company's ground or improvement leases or its ownership of the
property. Anchor tenants such as the Company and shopping center developers
commonly enter into reciprocal easement agreements which, among other things,
establish certain operating covenants to which the anchor tenants are bound. In
addition, individual anchor tenants often enter into separate agreements with
the developers relating to, among other things, common area charges and
operating covenants.

California. Credit card and accounts payable administrative functions are
provided from an administrative center located in Tempe, Arizona. All other
management, marketing and sales promotion, merchandising departments, and
support functions are located at the Company's corporate offices in Los Angeles,
California.

At January 29, 1994, the square footage used in the Company's operations
was as follows:

OWNED
SUBJECT TO
OWNED GROUND LEASE LEASED TOTAL
----- ------------ ------ -----

Stores . . . . . . . . . . . . . . . . . . . . . 4,819,500 2,765,000 7,592,300 15,176,800
Distribution centers and other facilities. . . . 2,240,000 -- 56,500 2,296,500

Thirty-one of the Company's stores and the Company's corporate offices and
distribution center are encumbered by deeds of trust in favor of the Company's
largest secured creditor. An additional nine of the Company's stores are
encumbered by deeds of trust in favor of certain banks under the Company's loan
agreements with such banks. One other stores and two non-store facilities are
encumbered under individual mortgage agreements with other lenders.

For additional information related to the Company's properties, see
"Item 1. Business -- Company Operations".

ITEM 3. LEGAL PROCEEDINGS

CHAPTER 11 PROCEEDINGS; UNRESOLVED CLAIMS

A discussion of the events surrounding the Company's bankruptcy filing and
an explanation of the material terms of the Company's reorganization under the
POR is set forth in "Item 1. Recapitalization." None of the Company's
subsidiaries filed petitions for relief under the Bankruptcy Code.
Notwithstanding the confirmation and effectiveness of the POR, the Court
continues to have jurisdiction to, among other things, resolve disputed
prepetition claims against the Company and to resolve other matters that may
arise in connection with or relate to the POR.

Pursuant to the POR, the Company is required to distribute .046 shares of
Common Stock for each $1.00 of allowed general unsecured claims. The POR
estimated the total amount of such claims to be approximately $600.0 million,
against which the Company reserved 27.6 million shares of Common Stock. As of
January 29, 1994, approximately $52.9 million of disputed claims remained
outstanding. Management believes such claims will ultimately be allowed upon
settlement or litigation for approximately $19.0 million, for which the Company
has reserved approximately 1.0 million shares. Management believes that
reserved shares of Common Stock will be sufficient to meet the Company's
obligations to such claim holders. If all disputed claims were allowed in full,
such claim holders would be entitled to a total of 2.4 million shares of Common
Stock, compared to the 1.0 million shares reserved, resulting in a dilution to
holders of outstanding Common Stock of approximately 3%. Management regularly
evaluates the status of remaining disputed claims and claim settlement
experience and accordingly adjusts its estimate of the number of shares to be
reserved for issuance with respect to such claims. In addition, the Company has
reserved approximately 0.2 million shares for preconfirmation stockholders of
the Company who have not yet claimed the distribution of Common Stock to which
they were entitled under the POR. The total of 1.2 million shares is included
in the Company's calculation of its outstanding Common Stock. In addition, 0.2
million Warrants will remain issuable to certain preconfirmation stockholders
pursuant to the POR. There are no contractual restrictions on the resale of
these securities. Such securities may be sold into a public market without
restriction at any time, potentially resulting in an adverse effect on the
market for, or the market price of, the Common Stock.

The Company is engaged in an ongoing effort to resolve these remaining
disputed claims. Because of the disputed nature of these claims and the delays
associated with litigation generally, Management anticipates that the settlement
of these claims is likely to occur over an extended period of time.

OTHER LEGAL PROCEEDINGS

The Company is involved in various other legal proceedings incidental to
the normal course of business. Management does not expect that any of such
other proceedings will have a material adverse effect on the Company's financial
position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

(a) Information with respect to the principal market on which the
Company's Common Stock is traded and the range of high and low closing market
prices for the following periods during the past two fiscal years are set forth
in the table below:

CLOSING MARKET PRICE RANGES OF
COMMON STOCK

COMMON STOCK HIGH LOW
---- ---

13 weeks ended January 29, 1994. . . . . . . . . . . . . $ 14 3/4 $ 8 1/2
13 weeks ended October 30, 1993. . . . . . . . . . . . . 16 12 7/8
13 weeks ended July 31, 1993 . . . . . . . . . . . . . . 17 3/8 12 3/8
13 weeks ended May 1, 1993 . . . . . . . . . . . . . . . 12 3/4 9 1/2
13 weeks ended January 30, 1993. . . . . . . . . . . . . 10 3/8 6
For the period from October 8 to October 31, 1992. . . . 7 1/4 5 7/8

Although the Company's stock was publicly traded prior to the period from
October 8 to October 31, 1992, the table above excludes data with respect to the
Company's common stock outstanding prior to the Emergence Date, which data is
not comparable with data related to the Common Stock.

The New York Stock Exchange is the principal market on which the Company's
Common Stock is traded.

(b) There were 18,640 holders of record of shares of Common Stock of the
Company as of April 25, 1994.

(c) The Company did not declare dividends during the 52-week period ended
January 29, 1994 or the 52-week period ended January 30, 1993. In addition, the
Company's credit agreement with GE Capital (the "GE Credit Agreement") and the
Company's settlement agreement with BofA, as agent for the Banks (the "BOA
Settlement Agreement") prohibit the Company from paying dividends to
stockholders.

ITEM 6. SELECTED FINANCIAL DATA

A five-year summary of certain financial information about the Company is
presented in the following table:

FIVE YEAR FINANCIAL SUMMARY

Period Ended
----------------------------------------------------------------------------------
January 29, January 30, February 1, February 2, August 4, July 29,
(Dollar amounts in thousands, 1994 1993 1992 1991(1) 1990 1989
except per share data) (52 weeks) (52 weeks) (52 weeks) (26 weeks) (53 weeks) (52 weeks)
- - -------------------------------------------------------------------------------------------------------------------------------

EARNINGS DATA
Sales. . . . . . . . . . . . . . . . . $2,092,681 $2,137,847 $2,127,917 $1,318,565 $2,857,819 $2,787,393
Percent increase (decrease)
from prior year. . . . . . . . . . . (2.1%) 0.5% (9.4%)(2) (4.5%)(3) 2.5% 6.5%
Finance charge revenue . . . . . . . . 81,438 82,642 93,992 49,262 125,036 94,888
Cost of goods sold, including
occupancy & buying costs . . . . . . 1,589,077 1,587,979 1,591,770 991,140 2,098,382 2,013,640
Selling, general and
administrative expenses. . . . . . . 551,098 561,610 559,886 335,381 729,578 689,877
Charge for non-recurring
costs. . . . . . . . . . . . . . . . 45,000
Provision for consolidation
programs . . . . . . . . . . . . . . 47,000
Gain on sale of Thalhimers . . . . . . (30,000)
Other (income) expense(4). . . . . . . 4,831 6,000
Interest expense, net. . . . . . . . . 84,864 89,808 102,288 71,046 161,534 160,344
-------- -------- -------- --------- -------- --------
Earnings (loss) from continuing
operations before reorgani-
zation costs and income
taxes. . . . . . . . . . . . . . . . (95,920) (18,908) (32,035) (46,740) (11,470) 12,420
Reorganization income (costs). . . . . 884,131 (138,057) (40,000)
-------- -------- -------- --------- -------- --------
Pretax earnings (loss) from
continuing operations. . . . . . . . (95,920) 865,223 (170,092) (86,740) (11,470) 12,420
Income tax benefit (expense) . . . . . (9,800) 13,200 2,000 (5,000)
-------- -------- -------- --------- -------- --------
Earnings (loss) from
continuing operations. . . . . . . . (95,920) 855,423 (170,092) (73,540) (9,470) 7,420
Extraordinary income (costs)
and changes in accounting(5) . . . . 323,220 (46,894) (14,070) (16,500) 6,050
-------- -------- -------- --------- -------- --------
Net earnings (loss). . . . . . . . . . $ (95,920) $ 1,178,643 $ (216,986) $ (87,610) $ (25,970) $ 13,470
-------- -------- -------- --------- -------- --------
-------- -------- -------- --------- -------- --------
Loss per common share(6) . . . . . . . $ (2.30)
----------
----------
OTHER DATA
Capital expenditures . . . . . . . . . $ 59,957 $ 38,242 $ 34,850 $ 37,989 $ 83,220 $ 75,849
Depreciation and amortization. . . . . 33,987 38,540 43,636 21,836 50,995 52,956

PERIOD END DATA
Working capital. . . . . . . . . . . . 739,810 701,478 628,270 978,082 843,414 873,307
Total assets . . . . . . . . . . . . . 1,934,147 1,912,902 1,667,662 1,755,421 2,045,194 1,988,365
Liabilities subject to settlement
under reorganization
proceedings. . . . . . . . . . . . . 598,321 598,650
Receivables based financing. . . . . . 332,182 467,577 489,254 633,798 678,646 652,432
Other secured long-term debt
and capital lease obligations. . . . 561,954 563,216 508,429 515,290 939,797 956,665
Convertible subordinated notes . . . . 143,750
Common stock and other share-
holders' equity (deficit). . . . . . 413,717 374,761 (508,476) (272,627) (193,820) (211,617)
Common shares outstanding
(in thousands) . . . . . . . . . . . 46,814(7) 35,200(7) 30,349 30,369 29,848 23,060
Number of stores . . . . . . . . . . . 83 83 88 89 115 114

(1) Effective as of February 2, 1991, the Company changed its fiscal year end
from the Saturday closest to July 31 of each year to the Saturday closest
to January 31 of each year.

(2) Sales decrease on a comparative 12 month basis excluding the 1990 sales of
Thalhimers, which was sold.

(3) Sales decrease on a comparative six month basis, excluding sales for the
comparable period for Thalhimers, which was sold.

(4) Includes gains on asset sales of $7.3 million in 1990, costs of the buying
office closure of $12.1 million in 1990, and $6.0 million in 1989.

(5) Includes gain on debt discharge of $304.4 million in 1992, a charge for a
change in accounting for post-retirement medical benefits of $30.0 million
in 1991, an extraordinary charge of $16.5 million in 1990 for the uninsured
loss associated with the October 1989 San Francisco earthquake, and income
for changes in accounting for income taxes of $18.8 million in 1992 and
$15.3 million in 1989, and costs relating to early retirements of debt of
$16.9 million in 1991, $14.1 million in the Transition Period ended
February 2, 1991, and $9.2 million in 1989.

(6) Earnings per common share were $.65 for the seventeen weeks ended January
30, 1993. Per share data for periods prior to the Emergence Date have been
omitted as these amounts do not reflect the current capital structure.

(7) Includes 35.0 million shares of Common Stock expected to be issued in
accordance with the POR. As of January 29, 1994, 1.2 million of these
shares remain to be issued.

The following table sets forth the consolidated capitalization and short-
term debt of the Company and its consolidated subsidiaries at January 29, 1994
(dollar amounts in thousands):

SHORT-TERM DEBT
Credit Facility(1) . . . . . . . . . . . . . . . . . . . . . . $ --
Current portion of long-term secured debt. . . . . . . . . . . 570
Current portion of capital lease obligations . . . . . . . . . 2,889
---------
TOTAL SHORT-TERM DEBT. . . . . . . . . . . . . . . . . . . . $ 3,459
---------
---------
LONG-TERM SENIOR DEBT
Receivables Based Financing(1)(2). . . . . . . . . . . . . . . $ 332,182
---------
Secured Debt
Term loans due in 1999 (3.875 percent at January 29, 1994) . 89,663
9.0 percent notes due 1997-2002. . . . . . . . . . . . . . . 68,509
9.9 percent notes due 1994-2010. . . . . . . . . . . . . . . 9,442
10.67 percent notes due 1997-2002(3) . . . . . . . . . . . . 344,000
Other notes (8.25 percent to 9.9 percent). . . . . . . . . . 6,243
---------
Total secured debt . . . . . . . . . . . . . . . . . . . . 517,857
Less current portion of secured debt . . . . . . . . . . . (570)
---------
Total long-term portion of secured debt. . . . . . . . . . 517,287
---------
TOTAL LONG-TERM SENIOR DEBT. . . . . . . . . . . . . . . . . 849,469
---------

CAPITAL LEASE OBLIGATIONS (excluding current maturities of
$2,889). . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,667
---------
6.25 PERCENT CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2000(4) . 143,750
---------

SHAREHOLDERS' EQUITY
Preferred Stock -- 25 million $.01 par shares authorized;
.9 million shares outstanding(5) . . . . . . . . . . . . . . 9
Common Stock--100 million $.01 par value shares authorized;
46.8 million shares outstanding(6) . . . . . . . . . . . . . 468
Other Paid-in Capital. . . . . . . . . . . . . . . . . . . . . 500,785
SFAS 87 Adjustment . . . . . . . . . . . . . . . . . . . . . . (14,345)
Accumulated Deficit. . . . . . . . . . . . . . . . . . . . . . (73,200)
---------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . 413,717
---------

TOTAL CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . $ 1,451,603
-----------
-----------
<FN>
(1) As of January 29, 1994, there were no outstanding borrowings under the
Credit Facility and outstanding borrowings under the Receivables Facility
were $332.2 million.
(2) The Company funds its credit card activities through the Receivables
Securitization Facility, which provides for a special purpose corporation,
whose accounts are consolidated into the Company, to purchase the Company's
proprietary credit card receivables and to pay for these interests through
the issuance of up to $575.0 million in commercial paper. The
securitization program is currently scheduled to mature on October 8, 1995.
(3) Cash interest is payable on the 10.67% notes at the reduced rate of 7.5%
per annum through October 8, 1994. The remaining interest (the difference
between the contractual rate of 10.67% and 7.5%) is being capitalized into
the 9.0% notes due 2002. After October 8, 1994 cash interest will be
payable at 10.67%.
(4) The notes are convertible at the option of the holder at a conversion price
of $12.19, subject to adjustment. The notes are redeemable at the option
of the company on or after December 31, 1998.
(5) Preferred Stock outstanding includes approximately .1 million shares
issuable to certain prepetition creditors or preconfirmation stockholders
pursuant to the Company's POR.
(6) Based on the number of shares of Common Stock outstanding as of January 29,
1994. Includes approximately 1.2 million shares of Common Stock reserved
for issuance or otherwise issuable to certain prepetition creditors or
preconfirmation stockholders pursuant to the Company's POR. Does not
include: (i) 5.9 million shares reserved for issuance under the 1992 Stock
Incentive Plan, as amended (of which options with respect to 1.4 million
shares of Common Stock are outstanding and immediately exercisable at
prices of between $10.22 and $11.00 per share); (ii) 1.5 million shares

reserved for issuance to the Company's 401(k) Savings and Investment Plan;
or (iii) 2.5 million shares issuable at $17.00 per share upon exercise of
Warrants issued or issuable pursuant to the POR. Warrants to purchase 1.5
million of such shares are currently outstanding; Warrants to purchase .9
million shares are issuable upon surrender of outstanding Series A
Exchangeable Preferred Stock (the "Preferred Stock") for exchange; and
Warrants for .1 million shares remain issuable to certain preconfirmation
stockholders.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

INTRODUCTION

The discussion of results of operations that follows is based upon the
Company's consolidated financial statements set forth on pages 38-57. The
discussion of liquidity and capital resources is based upon the Company's
current financial position. Upon emergence from bankruptcy, the Company adopted
the principles of fresh start reporting as of October 3, 1992 (the "Effective
Date") to reflect the impact of the reorganization. As a result of the
application of fresh start reporting, the financial condition and results of
operations of the Company for dates and periods subsequent to the Effective Date
are not necessarily comparable to those prior to the Effective Date.

RESULTS OF OPERATIONS

OVERVIEW. The Company has undertaken significant organizational changes
during the past three years which have impacted operating results. In addition,
there are inherent difficulties in comparing the pre- and post-emergence period
financial statements due to the application of fresh start reporting effective
October 3, 1992. Although separate reporting is required for the 35-week period
ended October 3, 1992 and the 17-week period ended January 30, 1993, certain
pre-petition and post-petition income and expense elements remain comparable.

The following table summarizes the results for the 36-months ended January
29, 1994 on a comparable period basis. During the current year, certain one-
time charges were incurred due to the execution of the Company's new business
strategy. These charges included $18.0 million of strategic inventory clearance
markdowns, which are part of the Company's inventory repositioning program.
These markdowns were taken over and above markdowns taken in the normal course
of business. In the prior year periods, markdowns of this nature were charged
to previously established inventory valuation reserves. The one-time charges
also included a non-recurring charge of $25.0 million for costs to implement a
strategic plan, the activity value analysis, to streamline the Company's
organizational structure and reduce administrative costs. These measures have
resulted in cost savings of approximately $7.0 million in the current year with
additional annualized savings of $30.0 million and $3.0 million expected to be
realized during fiscal 1994 and 1995. In the fourth quarter of the current
year, the Company recorded an additional $20.0 million charge to cover $15.0
million of costs relating to the January 1994 Northridge earthquake and $5.0
million for severance and other costs associated with additional restructuring
efforts.

The following table illustrates reported EBIT as well as proforma EBIT
which adjusts for the one-time charges described above:

January January February January February
PERIOD END DATE 29, 1994 30, 1993 1, 1992 30, 1993 1, 1992
-------- -------- -------- -------- --------
NUMBER OF WEEKS REPORTED 52 17 17 52 52
(IN MILLIONS) -------- --------- -------- -------- --------

Sales. . . . . . . . . . . . . . . . . . . . . . . . . $ 2,092.7 $ 889.8 $ 859.6 $ 2,137.8 $ 2,127.9
Finance charge income. . . . . . . . . . . . . . . . . 81.4 27.3 30.7 82.7 94.0
Cost of goods sold, including
occupancy and buying costs
(on a proforma FIFO basis)(1). . . . . . . . . . . . 1,580.0 660.8 636.7 1,582.8 1,586.5
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . 551.1 206.8 209.3 561.6 559.9
----------- --------- -------- ---------- ----------
Proforma operating FIFO EBIT(1). . . . . . . . . . . . 43.0 49.5 44.3 76.1 75.5
Adjustments to arrive at
reported EBIT:
LIFO credit (charge) . . . . . . . . . . . . . . . . 8.9 1.9 (3.2) (5.2) (5.2)
Realignment markdowns. . . . . . . . . . . . . . . . (18.0)
Special period end
adjustments(1) . . . . . . . . . . . . . . . . . . 17.5
Charge for non-recurring costs . . . . . . . . . . . (45.0)
----------- ---------- ---------- ---------- ----------
Reported EBIT. . . . . . . . . . . . . . . . . . . . . $ (11.1) $ 68.9 $ 41.1 $ 70.9 $ 70.3
----------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ----------

<FN>

(1) Interim period results are affected by the Company's practice of allocating
certain fixed buying and occupance costs among periods within the fiscal
year to match these costs with the associated seasonal sales revenue. As a
result of the application of fresh start reporting, however, the 1992 pre-
and post-emergence reporting periods each required separate year-end type
closings. Accordingly, buying and occupancy costs totalling $17.5 million,
which would normally have been allocated to the fourth quarter of fiscal
1992, were required to be expensed in September in 1992. The "proforma
operating FIFO EBIT" of $49.5 million for the seventeen week period ended
January 30, 1993, reflects the normal interim allocation of occupancy and
buying costs.

52-WEEK PERIOD ENDED JANUARY 29, 1994 ("1993"). Sales in the current year
were $2.09 billion, 2.1 percent less than the $2.14 billion reported in 1992.
The current year results reflect the impact of the January 17, 1994 Northridge
earthquake which resulted in the temporary closing of 14 stores. Currently,
four stores remain closed due to damage sustained in the earthquake. The prior
year includes results for three Utah stores and the Anaheim, California store
which were closed in January 1993. On a comparative store basis, current year
sales increased 1.6 percent over the comparable prior year period. Sales per
gross square foot increased to $138 in the current year compared to $137 in
1993.

Proforma operating FIFO EBIT of $43.0 million in the current year compares
to $76.1 million for the combined pre- and post-emergence periods comprising the
52-week period ended January 30, 1993. Current year results were impacted by
the necessary disruption associated with the implementation of programs to
significantly reorganize and reposition the Company.

Proforma FIFO cost of goods sold was $1,580.0 million, 75.5 percent of
sales in the current year compared to $1,582.8 million, 74.0 percent of sales in
the comparable prior year period. The 1.5 percent increase as a percent to
sales reflects a reduction in markup rate resulting primarily from a move to
everyday low pricing strategies and reflects the impact of competitive pricing
pressures. The LIFO credit of $8.9 million in the current year compares to a
charge of $5.2 million in the comparable prior year period. The current year
LIFO credit was calculated on the basis of an internally calculated inflation
index. This method, which was adopted effective October 3, 1992, provides the
company with an inflation measurement that is specific to its business and
eliminates reliance on the Bureau of Labor Statistics (BLS) national index. The
4.7 percent deflation generated by the internal index reflects the inventory
impact of the Company's move to value pricing during the current year. Had the
Company used the BLS index, which indicated a 1.3 percent rate of inflation for
the year, a LIFO charge of approximately $15.0 million would have resulted for
fiscal 1993.

SG&A decreased to $551.1 million in the current year compared to $561.6
million in the comparable prior year period. Although SG&A as a percent to
sales was 26.3 percent in both periods, the current year does begin to reflect
the favorable impact of the AVA program with cost savings of $7.0 million
reflected in the current year.

Finance charge revenue of $81.4 million in the current year compared to
$82.7 million in the comparable prior year period, and represented 3.9 percent
of sales in both years. Effective October 1993, changes in the terms of the
Company's revolving charge accounts reduced the minimum monthly payment
requirements on outstanding balances from 10 percent to 5 percent. This change
is expected to result in increases in customer receivable balances outstanding
and corresponding finance charge revenue gains next year.

Interest expense decreased to $84.9 million in the current year compared to
$89.8 million in the comparable prior year period. The decrease in the current
year interest expense results primarily from lower average borrowing rates under
the Company's Receivables Facility for periods subsequent to the Emergence Date
and the utilization of the net proceeds from the equity offering to lower
borrowings under the Credit and Receivables Facilities subsequent to July 1993.

Limitations on the Company's ability to record income tax benefits for net
operating loss carryforwards for financial statement purposes, together with the
impact of an offsetting state tax provision requirement, resulted in no tax
benefit being recognized on the current year $95.9 million net loss.

17-WEEK PERIOD ENDED JANUARY 30, 1993 ("POST-REORGANIZATION PERIOD").
Sales increased 3.5 percent to $889.8 million in the Post-reorganization Period
from $859.6 million in the comparable prior-year 17-week period ended February
1, 1992. On a comparable store basis, the sales increase was also 3.5 percent.
For the 13-week period ended January 30, 1993, comparable store sales increased
5.5 percent over the same prior year period, reflecting a generally strong
holiday selling season and positive responses to the Company's sales and credit
promotional activities.

Proforma operating FIFO EBIT increased to $49.5 million, 5.6 percent of
sales in the Post-reorganization Period from $44.3 million, 5.2 percent of
sales, in the comparable prior-year period. Proforma EBIT reflects the reversal
of the cost-of-goods-sold adjustment described in note 1 to the table above.
The improvement reflects the increased sales base and the realization of the
benefits of cost reduction programs. Reported EBIT increased to $68.9 million,
7.7 percent of sales, in the Post-reorganization period.

Proforma FIFO cost of goods sold increased to 74.3 percent of sales, $660.8
million, in the Post-reorganization Period from 74.1 percent, $636.7 million, in
the comparable prior-year period. Cost of goods sold as a percentage of sales
increased .2 percent as a result of competitive pressures on gross margins which
more than offset the impact of higher sales and lower buying and occupancy
costs. The LIFO credit of $1.9 million for the Post-reorganization Period
compares to a charge of $3.2 million in the comparable prior-year period. Since
the Company was deemed a new entity effective October 3, 1992, its previous LIFO
reserve was eliminated at that date. The credit for the 17-week period ended
January 30, 1993 reflects the general price deflation during the period together
with the deflationary impact on the Company's internally generated inflation
index as a result of the movement to value pricing. The comparable prior year
period charge of $3.2 million, was an allocation of a portion of the fiscal 1992
$5.2 million charge.

SG&A decreased to $206.8 million, 23.2 percent of sales, in the Post-
reorganization Period from $209.3 million, 24.3 percent of sales, in the
comparable prior-year period. This decrease is comprised of a $6.5 million
decrease in other SG&A primarily reflecting reduced fixed costs resulting from
the Company's consolidation programs, partially offset by a $4.2 million
increase in sales promotion and selling expenses in response to competitive
pressures during the holiday season.

Finance charge revenue decreased to $27.3 million, 3.1 percent of sales, in
the Post-reorganization Period from $30.7 million, 3.6 percent of sales, in the
comparable prior-year period, reflecting the conservative approach to credit
purchases generally, including proprietary credit card purchases, taken by
customers prior to the holiday season, and the continuation of the trends
discussed under "Business -- Proprietary Credit Card Operations". In addition,
during the past two years, including the Post-reorganization Period, the Company
has experienced an accelerated collection rate on proprietary credit card
accounts resulting in lower overall outstanding customer receivables.

Interest expense decreased to $29.6 million in the Post-reorganization
Period from $32.1 million in the comparable prior-year period. This reduction
was largely due to lower average interest rates.

Net earnings of $22.7 million in the Post-reorganization Period are net of
taxes at statutory rates and reflect an effective tax rate of 42.2 percent.

The seasonal nature of the retail business results in a significant portion
of the earnings from operations for the year being generated in the 17-week
period. Interim operating results are thus not necessarily indicative of
earnings from operations that will be realized for the full fiscal year.

52-WEEK PERIOD ENDED JANUARY 30, 1993 ("1992"). Although the adoption of
fresh start reporting significantly affected comparability, certain income and
expense elements for the Post-reorganization Period and the 35-week period ended
October 3, 1992 (The "Pre-reorganization Period") remain comparable and are
addressed in the following analysis of results of operations for 1992.

Sales for both 1992 and the prior fiscal year ended February 1, 1992
("1991") were $2.1 billion. Sales growth during the first three quarters of
1992 was significantly limited by the weakness in the California economy from
which approximately 90 percent of the Company's business is generated. On a
comparable store basis, sales for 1992 increased 0.9 percent as compared to the
prior year. Sales per gross square

foot increased to $137 in 1992 from $133 in the prior year as a result of the
corresponding increase in sales.

Operating FIFO EBIT increased to $76.1 million, 3.6 percent of sales, in
1992 from $75.5 million, 3.5 percent of sales, in 1991. While EBIT was
essentially unchanged, 1992 reflects the effect of overhead reductions resulting
from the Company's consolidation programs substantially offset by increased
promotional and selling expenses in response to economic and competitive factors
particularly during the first three quarters of 1992.

FIFO cost of goods decreased to $1,582.8 million, 74.0 percent of sales, in
1992 from $1,586.5 million, 74.6 percent of sales, in 1991. The improvement
reflects a 0.9 percent increase in gross margin representing the impact of
reductions in fixed buying and occupancy costs partially offset by a 0.4 percent
decline in gross margin resulting from lower purchase markup. The LIFO method
of inventory accounting resulted in a charge of $5.2 million in both periods.

SG&A increased to $561.6 million in 1992 from $559.9 million in 1991.
However, as a percentage of sales, SG&A was 26.3 percent in both years.
Although there was no net improvement in SG&A as a percent of sales, 1992
reflects an $18.7 million decrease in other SG&A, reflecting the impact on fixed
costs of the Company's consolidation programs, offset by a $20.8 million
increase in promotional expenses and selling and support services required to
stimulate business in the difficult California retail environment.

Finance charge revenue decreased to $82.6 million, 3.9 percent of sales, in
1992 from $94.0 million, 4.4 percent of sales, in 1991. The reduction reflects
the impact of lower levels of consumer confidence in the California economy
manifested by a decrease in credit purchases and an acceleration in the paydown
of outstanding credit card balances.

Interest expense decreased to $89.8 million in 1992 from $102.3 million in
1991. This decline was largely due to lower average interest rates.

Net earnings of $1,178.6 million in 1992 reflect reorganization and debt
discharge related gains of $1,188.5 million and a benefit of $18.8 million from
the adoption of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." The change in accounting reflects the elimination of
existing deferred income taxes through the recognition of net operating loss
carryforwards for which no benefit could be recognized under the previous
accounting standard. The $6.8 million tax benefit recognized in the Pre-
reorganization Period reflects the reversal of existing tax reserves on the
favorable resolution of income tax audits for tax years through July 1990. The
tax provision of $16.6 million for the Post-reorganization Period reflects state
and federal taxes at statutory rates on pre-tax earnings for that period.

The net loss of $217.0 million in 1991 includes a charge of $138.1 million
for reorganization costs comprised of a $65.0 million provision for the
consolidation of the Company into a single operating entity, a $34.0 million
charge for settlement of certain disputed prepetition trade claims and valuation
adjustments to reflect the effect of the Chapter 11 proceedings on the amounts
to be realized for certain assets, a $29.4 million charge for professional fees
and other costs directly related to the proceedings, and a $9.7 million charge
to write-off unamortized debt issue costs related to the Company's then
outstanding subordinated debt. In addition, the net loss reflects an
extraordinary net-of-tax charge of $16.9 million on the early extinguishment of
an interim receivables facility entered into as a result of the filing for
bankruptcy and a net-of-tax charge of $30.0 million resulting from a change in
the method of accounting for post-retirement medical and other benefits as a
result of the adoption of Statement of Financial Accounting Standards No. 106,
"Employers Accounting for Post retirement Benefits Other Than Pensions."

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW. During the current year the Company's liquidity was
significantly enhanced by net proceeds of $147.5 million from the issuance of
11.45 million shares of common stock and from net proceeds of $137.9 million
from an issuance of 6 1/4% Convertible Senior Subordinated Notes. Management
believes that this infusion of funds, together with other actions taken with
respect to covenant requirements under the Company's existing credit facilities,
has positioned the Company to aggressively pursue its business strategy,
including the modernization of its stores.

STOCK OFFERING. The July 1993 public offering of common stock raised net
proceeds of $147.5 million. The 10 million initial share offering plus the 1.45
million of over-allotment option shares exercised were issued at a price of
$13.75 per share. The proceeds were principally intended to make capital
available for the execution of the Company's business plan with $9.0 million
designated to prepay existing notes.

CONVERTIBLE SENIOR SUBORDINATED NOTES. On December 21, 1993, the Company
issued and sold $143.75 million of 6.25% Convertible Senior Subordinated Notes
due December 31, 2000 (the "Notes"). Interest on the Notes will be paid semi-
annually on December 31 and June 30 of each year, commencing June 30, 1994. The
Notes are convertible at the option of the holder thereof at any time after 90
days following the date of original issuance thereof and prior to maturity,
unless previously redeemed, into shares of Common Stock, at a conversion price
of $12.19 per share, subject to adjustment in certain events.

The net proceeds of $137.9 million from the Note issuance will be used to
fund the Company's business strategy, including the modernization of stores.
Until such capital expenditures are made, the proceeds have been used to
eliminate outstanding borrowings under the Company's Credit Facility and to
reduce the level of financing under the Receivables Facility.

CREDIT FACILITIES. As of the Emergence Date, the Company obtained a new
three-year Credit Facility and a new three-year Receivables Facility. Subject
to collateral limitations, the new facilities provide for up to $225.0 million
in credit financing and up to $575.0 million to finance the Company's
proprietary credit card receivables portfolio. As of January 29, 1994, no
advances and $48.3 million in letters of credit were outstanding under the
Credit Facility and $332.2 million of borrowings, $150.1 million less than the
maximum available based on the level of customer receivables, were outstanding
under the Receivables Facility.

A substantial portion of the Company's debt is variable rate debt.
Assuming that the average borrowings and all other variables would have remained
constant, an increase (or decrease) in the annual interest rates applicable to
the variable rate portion of the Company's debt throughout the 52-week period
ended January 29, 1994 of one percent would have increased (or decreased) the
Company's interest expense for such period by $5.4 million.

The Credit Facility contains a number of operating and financial covenants,
as well as significant negative covenants. The Credit Facility includes
covenants for material adverse changes, minimum aggregate net cash flow and
earnings before interest, taxes, depreciation and amortization ("EBITDA"). In
addition, the Credit Facility prohibits the Company from paying dividends on its
stock and places limitations on the Company's capital expenditures. The Company
is currently in compliance with all covenants under the Credit Facility. For
the three month period ended January 29, 1994, all financial covenant
requirements other than the Company's net inventory ratio were waived. The
Company's net inventory ratio at January 29, 1994 was 78.1% or 12.5% less than
the maximum inventory ratio permitted under the Credit Facility. The Credit
Agreement and the Company's agreements with its other principal secured
creditors also contain other covenants and requirements.

Since July 1, 1993, the Company has had to amend its financial covenants in
the Credit Facility as a result of charges incurred with respect to
implementation of its business strategy, increased competitive pressure on sales
and margins and the weak California economy. The charges included the $25
million charge in connection with the AVA program and the $18 million of
inventory clearance markdowns designed to upgrade the Company's merchandise
offerings. Subsequent to year end, the Credit Facility financial covenants were
relaxed by an amendment which took into account the enhanced liquidity resulting
from the Senior Subordinated Notes funding.

CAPITAL EXPENDITURES. The Company concentrated its $60.0 million of
capital expenditures in 1993 on store modernization and selling space
improvement in addition to ongoing required maintenance expenditures. In light
of the bankruptcy proceedings, the Company's capital expenditure programs were
curtailed in 1992 and 1991. Capital expenditures amounted to $38.2 million in
1992 and $34.9 million in 1991. Capital expenditures between 1994 and 1996 are
expected to be approximately $336.0 million. During this period capital
expenditures for modernization and selling space improvements, including
capitalized interest, are expected to total approximately $276.0 million, and
maintenance capital expenditures are expected to total approximately $60.0
million. The capital expenditure program may be

modified over time to accommodate market factors and the Company's then existing
financial condition. In addition, from time to time the Company may consider
proposals to close existing stores or open new stores.

The Company's ability to fund its capital expenditure program and to
implement its business strategy will depend on cash flow from operations and the
continued availability of borrowings under the Credit Facility. Operating cash
flow will be affected by, among other things, the timing of results from the
Company's business strategy, sales during the holiday season, and general
competitive and economic conditions. The Company believes that operating cash
flow and amounts available under the Credit Facility, together with proceeds
from the 1993 Convertible Senior Subordinated Notes and equity offerings, will
be sufficient to fund the major elements of its business strategy. However, the
Company continuously evaluates increasing or decreasing the number of stores,
the terms of its Credit Facility and Receivables Facility and other operating
and financing alternatives.

OTHER MATTERS. At January 29, 1994, the Company has estimated federal tax
net operating loss ("NOL") carryforwards of $495.0 million, which expire in
years 2004 through 2008. The Company's ability to utilize the NOL carryforwards
is limited on an annual basis as a result of the change in control that occurred
at the emergence from bankruptcy. Notwithstanding this limitation, Management
does not currently anticipate that the Company will have any significant cash
requirements for income tax payments for the next several years based on the
availability of the NOLs.

If within a three-year period, however, 50% or more of the stock of the
Company changes ownership again, the future annual use of NOLs may be limited to
a greater extent by a new annual limit. The new annual limitation would be
calculated as the product of (i) the highest long-term tax-exempt rate for a
designated period prior to the ownership change and (ii) the market value of the
Company at such time. This annual limit would apply to any NOLs incurred prior
to the new change in control, but after the change in control that occurred at
the emergence from bankruptcy. Furthermore, if the new annual limit were lower
than the current annual limit, the new annual limit would apply to all NOLs of
the Company incurred prior to the new change in control and could increase cash
requirements for income tax payments.

INFLATION

The effect of inflation on the Company's sales and cost of sales is, in the
opinion of Management, most closely approximated by the available inflation
factors utilized in the computation of LIFO inventories. Commencing with the
17-week period ended January 30, 1993, the Company is utilizing an internally
developed inflation index based on an analysis of the Company's unique
merchandise assortment. For periods prior to the Effective Date, the Company
utilized the Department Store Inventory Price Index published by the Bureau of
Labor Statistics (the "BLS Index"). For the 52-week period ended January 29,
1994, the internally developed index indicated deflation of 4.7 percent,
consistent with the price reductions resulting from the movement to value
pricing for a larger proportion of the Company's inventories. For this same
period, the BLS Index indicated a 1.3 percent rate of inflation.

SEASONALITY

The department store business is seasonal in nature with a high proportion
of sales and earnings generated in November and December. Working capital
requirements fluctuate during the year, increasing somewhat in late Summer in
advance of the Fall merchandising season and increasing substantially at the
outset of the holiday season when the Company must carry significantly higher
inventory levels. Quarterly sales and EBIT for the 36 months ended January 29,
1994 were as follows:

Sales
-------------------------------
Dollar Percent of
(DOLLAR AMOUNTS IN MILLIONS) Sales Annual Sales EBIT
-------- ------------ ---------

13 weeks ended January 29, 1994. . . . . . . . . . $ 705.6 33.7% $ 30.0(1)
13 weeks ended October 30, 1993. . . . . . . . . . 469.7 22.4 (5.3)
13 weeks ended July 31, 1993 . . . . . . . . . . . 474.9 22.7 4.2(1)
13 weeks ended May 1, 1993 . . . . . . . . . . . . 442.5 21.2 5.0

13 weeks ended January 30, 1993 (proforma) . . . . 732.5 34.3 49.4(2)
13 weeks ended October 31, 1992 (proforma) . . . . 490.3 22.9 3.6(2)
13 weeks ended August 1, 1992. . . . . . . . . . . 481.4 22.5 12.3
13 weeks ended May 2, 1992 . . . . . . . . . . . . 433.6 20.3 5.6

13 weeks ended February 1, 1992. . . . . . . . . . 693.2 32.6 36.2
13 weeks ended November 2, 1991. . . . . . . . . . 508.7 23.9 15.1
13 weeks ended August 3, 1991. . . . . . . . . . . 495.9 23.3 15.3
13 weeks ended May 4, 1991 . . . . . . . . . . . . 430.1 20.2 3.7

<FN>
(1) EBIT before non-recurring costs of $25.0 million in the period ended July
31, 1993 and $20.0 million in the period ended January 29, 1994.

(2) Reported EBIT for the 13-week periods ended October 31, 1992 and January
30, 1993 were a loss of $13.9 million and earnings of $66.9 million,
respectively. Proforma EBIT reflects the allocation to the 13-week period
ended January 30, 1993 of $17.5 million of fixed buying and occupancy costs
recognized at October 3, 1992 as a result of the application of fresh start
reporting.

As a result of the seasonal nature of the Company's business, the Company
follows the practice of allocating certain fixed buying and occupancy costs
among quarters within the fiscal year in proportion to projected quarterly sales
results. This allocation of costs, therefore, results in a higher portion of
yearly fixed buying and occupancy costs being allocated to the fourth quarter.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplementary data are as set
forth in the "Index to Financial Statements" on page 34.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

For information required under this item with respect to directors of the
Company, see "Nominees for Election as Directors" and "Compliance with Section
16(a) of the Exchange Act" in the Company's definitive Proxy Statement relating
to the Annual Meeting of Shareholders to be held on June 17, 1994, which
sections are hereby incorporated by reference.

For information required under this item with respect to executive officers
of the Company see "Executive Officers of the Company" under Item 1.

ITEM 11. EXECUTIVE COMPENSATION

For information required under this item with respect to executive
compensation see "Compensation of Executive Officers and Directors" in the
Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on June 17, 1994, which sections are hereby incorporated
by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

For information required under this item with respect to beneficial
ownership of the Company's voting securities by each director and all executive
officers and directors as a group, and by any person known to beneficially own
more than 5% of any class of voting security of the Company, see "Principal
Stockholders and Management Ownership" in the Company's definitive Proxy
Statement relating to the Annual Meeting of Shareholders to be held on June 17,
1994, which sections are hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For information required under this item with respect to certain
relationships and related transactions, see "Principal Stockholders and
Management Ownership -- Certain Relationships and Related Transactions" and
"Compensation of Executive Officers and Directors -- Compensation of Directors"
in the Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on June 17, 1994, which sections are hereby incorporated
by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

(1) Financial Statements

The consolidated financial statements of the Company are set forth in the
"INDEX TO FINANCIAL STATEMENTS" on page 34.

(2) Financial Statement Schedules

Financial Statement Schedules, except those indicated in the "INDEX TO
FINANCIAL STATEMENTS" on page 34, have been omitted because the required
information is included in the financial statements or financial review, or the
amounts are not significant.

(3) Exhibits

Exhibits are as set forth in the "INDEX TO EXHIBITS" on page 66.

(b) Reports on Form 8-K

November 8, 1993 Filing of Fourth Amendment to credit Agreement, dated
as of October 31, 1993, among Carter Hawley Hale
Stores, Inc., various financial institutions and
General Electric Capital Corporation, as agent for the
lenders.

December 21, 1993 Filing of Fifth Amendment to Credit Agreement, dated as
of December 10, 1993, among Carter Hawley Hale Stores,
Inc., various financial institutions and General
Electric Capital Corporation, as agent for the lenders.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized this 22nd day of
April, 1994.

CARTER HAWLEY HALE STORES, INC.

By: /s/ DAVID L. DWORKIN
-------------------------------------
David L. Dworkin
President and Chief Executive Officer

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on April 22, 1994.

SIGNATURE TITLE
--------- -----

Chairman of the Board
/s/ SAMUEL ZELL and Director
- - -------------------------------------
Samuel Zell

President,
Chief Executive Officer and
Director (Principal
/s/ DAVID L. DWORKIN Executive Officer)
- - --------------------------------------
David L. Dworkin

Executive Vice President,
Chief Financial Officer
/s/ JOHN C. HAECKEL (Principal Financial Officer)
- - --------------------------------------
John C. Haeckel

Vice President, Accounting
/s/ JOHN D. DAVIES (Principal Accounting Officer)
- - --------------------------------------
John D. Davies

/s/ DR. LEOBARDO F. ESTRADA Director
- - ---------------------------------------
Dr. Leobardo F. Estrada

/s/ SIDNEY R. PETERSEN Director
- - ----------------------------------------
Sidney R. Petersen

* Director
- - ----------------------------------------
Dennis C. Stanfill

SIGNATURE TITLE
--------- -----

/s/ TERRY SAVAGE Director
- - ----------------------------------------
Terry Savage

/s/ DAVID M. SCHULTE Director
- - ----------------------------------------
David M. Schulte

/s/ STANFORD SHKOLNIK Director
- - ----------------------------------------
Stanford Shkolnik

* Director
- - ----------------------------------------
Dr. Robert M. Solow

/s/ JAMES D. WOODS Director
- - ----------------------------------------
James D. Woods

*The undersigned, by signing his name hereto, does sign and execute this
Annual Report on Form 10-K pursuant to the Powers of Attorney executed by the
above-named officers and directors and filed herewith.

By: /s/ MARC E. BERCOON
---------------------------------
Marc E. Bercoon
Attorney-in-Fact

CARTER HAWLEY HALE STORES, INC.

INDEX TO FINANCIAL STATEMENTS

PAGE
----

Report of Independent Accountants (Relating to Period After October 3, 1992). . . . . . . . . . 35
Report of Independent Accountants (Relating to Period Before October 3, 1992) . . . . . . . . . 36
Consent of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Consolidated Financial Statements
Consolidated Statement of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Consolidated Statement of Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . 41
Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . 42
Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Financial Statement Schedules
Schedule II--Accounts Receivable from Related Parties . . . . . . . . . . . . . . . . 58
Schedule V--Property and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . 59
Schedule VI--Accumulated Depreciation and Amortization
of Property and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Schedule VIII--Valuation and Qualifying Accounts and Reserves . . . . . . . . . . . . 61
Schedule IX--Short-Term Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . 62
Schedule X--Supplementary Income Statement Information. . . . . . . . . . . . . . . . 63
Quarterly Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Carter Hawley Hale Stores, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing on page 34 present fairly, in all material respects, the financial
position of Carter Hawley Hale Stores, Inc. and its subsidiaries at January
29, 1994 and January 30, 1993, and the results of their operations and their
cash flows for the fiscal year ended January 29, 1994 and the seventeen weeks
ended January 30, 1993, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.

As discussed in the Reorganization and Basis of Reporting section of the
Summary of Significant Accounting Policies, on September 14, 1992, the United
States Bankruptcy Court confirmed the Company's plan of reorganization. The
plan of reorganization, which was effective October 8, 1992, resulted in the
discharge of all claims against the Company which arose prior to February 11,
1991 and substantially altered the rights and interests of the existing
equity security holders. The Company utilized fresh start reporting as of
October 3, 1992 to account for the effects of the reorganization.

Price Waterhouse
Los Angeles, California
March 14, 1994

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Carter Hawley Hale Stores, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing on page 34 present fairly, in all material respects, the results of
operations and cash flows of Carter Hawley Hale Stores, Inc. and its
subsidiaries for the thirty-five weeks ended October 3, 1992 and the fiscal
year ended February 1, 1992, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.

As discussed in the Reorganization and Basis of Reporting section of the
Summary of Significant Accounting Policies, on February 11, 1991, the Company
filed a petition with the United States Bankruptcy Court for reorganization
under Chapter 11 of the Bankruptcy Code. The plan of reorganization was
effective October 8, 1992, at which time the Company emerged from bankruptcy.
The Company utilized fresh start reporting as of October 3, 1992 to account
for the effects of the reorganization.

As discussed in the Changes in Accounting Policies section of the Summary of
Significant Accounting Policies, the Company changed its method of accounting
for income taxes in the thirty-five week period ended October 3, 1992, and
its method of accounting for other post-employment benefits in the fiscal
year ended February 1, 1992.

Price Waterhouse
Los Angeles, California
March 12, 1993

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-58478 and 33-58480) and in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-51847) of
our reports dated March 14, 1994 and March 12, 1993 appearing on pages 35 and
36, respectively, of this Form 10-K.

Price Waterhouse
Los Angeles, California
April 26, 1994

CARTER HAWLEY HALE STORES, INC.

CONSOLIDATED STATEMENT OF EARNINGS

Year Ended Period Ended Year Ended
----------- ---------------------------- -----------
January 29, January 30, October 3, February 1,
1994 1993 1992 1992
(In thousands, except per share data) (52 weeks) (17 weeks) (35 weeks) (52 weeks)
- - -------------------------------------------------------------------------------------------------------------------

Sales $ 2,092,681 $ 889,843 $ 1,248,004 $ 2,127,917

Finance charge revenue 81,438 27,265 55,377 93,992

Cost of goods sold, including
occupancy and buying costs 1,589,077 641,361 946,618 1,591,770

Selling, general and administrative
expenses 551,098 206,804 354,806 559,886

Charge for non-recurring costs 45,000
----------- --------- ----------- ------------

Earnings (loss) from operations before
interest expense, reorganization
items and income taxes (11,056) 68,943 1,957 70,253

Interest expense, net 84,864 29,623 60,185 102,288

Earnings (loss) from operations
before reorganization income
(costs) and income taxes (95,920) 39,320 (58,228) (32,035)

Reorganization income (costs) 884,131 (138,057)
----------- --------- ----------- ------------

Earnings (loss) from operations
before income taxes 39,320 825,903 (170,092)

Income tax benefit (expense) (16,600) 6,800
----------- --------- ----------- ------------

Earnings (loss) before extraordinary
items and cumulative effect of
changes in accounting (95,920) 22,720 832,703 (170,092)

Extraordinary items
Gain on debt discharge 304,388
Costs related to early retirement
of debt (16,894)

Cumulative effect of changes in accounting
Income taxes 18,832
Post-retirement medical and other
benefits, net of income tax
benefit of $2,000 (30,000)
----------- --------- ----------- ------------

Net earnings (loss) $ (95,920) $ 22,720 $ 1,155,923 $ (216,986)
----------- --------- ----------- ------------
----------- --------- ----------- ------------
Earnings (loss) per common share $ (2.30) $ .65
----------- ---------
----------- ---------

See accompanying Summary of Significant Accounting Policies and Financial
Review.

CARTER HAWLEY HALE STORES, INC.

CONSOLIDATED BALANCE SHEET

January 29, January 30,
(In thousands) 1994 1993
- - -------------------------------------------------------------------------------

ASSETS
Current assets
Cash $ 18,192 $ 18,617
Accounts receivable, net 627,374 579,794
Merchandise inventories 427,631 467,709
Other current assets 9,799 12,913
----------- -----------
1,082,996 1,079,033

Property and equipment, net 810,608 788,129
Other assets 40,543 45,740
----------- -----------
$1,934,147 $1,912,902
----------- -----------
----------- -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable and current
installments $ 3,459 $ 59,385
Accounts payable 151,687 172,159
Accrued expenses 186,837 142,973
Current income taxes 1,203 3,038
----------- -----------
343,186 377,555

Receivables based financing 332,182 467,577
Other secured long-term debt 517,287 515,658
Convertible subordinated notes 143,750
Capital lease obligations 44,667 47,558
Other liabilities 124,508 117,343
Deferred income taxes 14,850 12,450

Shareholders' equity
Preferred stock, $.01 par value 9 11
Common stock, $.01 par value 468 352
Other paid-in capital 500,785 351,678
Total accumulated earnings (deficit) (87,545) 22,720
----------- -----------
413,717 374,761
----------- -----------

$1,934,147 $1,912,902
----------- -----------
----------- -----------

See accompanying Summary of Significant Accounting Policies and Financial
Review.

CARTER HAWLEY HALE STORES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

Year Ended Period Ended Year Ended
------------- --------------------------- ------------
January 29, January 30, October 3, February 1,
1994 1993 1992 1992
(In thousands) (52 weeks) (17 weeks) (35 weeks) (52 weeks)
- - -----------------------------------------------------------------------------------------------------------------------------

Operating activities
Earnings (loss) from operations $(95,920) $22,720 $832,703 $(170,092)
Adjustments to reconcile earnings (loss) from
operations to net operating cash flows
Fresh-start adjustment (906,373)
Depreciation and amortization 33,987 10,617 27,923 43,636
Stock compensation 1,401
Deferred income taxes 2,400 16,450
Change in operating assets and liabilities
Restricted cash 47,954 (47,954) 45,437
Customer receivables, net 2,158 (88,217) 105,040 78,166
Merchandise inventories 40,078 43,715 (79,476) (28,997)
Accounts payable and accrued expenses (7,590) (64,157) 59,309 201,893
Receivables securitization deposits 7,966
Other, net (10,455) (4,989) 14,359 (11,565)
------- ------- ------- -------
Net cash provided (used) by operating activities (35,342) (14,506) 5,531 166,444
------- ------- ------- -------

Investing activities
Proceeds from sales of property and
equipment 6,468
Purchases of property and equipment (59,957) (21,190) (17,052) (34,850)
------- ------- ------- -------
Net cash used by investing activities (53,489) (21,190) (17,052) (34,850)
------- ------- ------- -------

Financing activities
Net change in financing under receivables
based facilities (135,395) 79,271 (100,948) (144,544)
Net change in financing under working
capital facilities (52,315) (38,485) 53,800 37,000
Retirements of long-term debt and
capital lease obligations (16,855) (2,739) (1,929) (2,771)
Costs relating to early retirements of long-term
debt, net of items not requiring cash outlay (10,652) (16,894)
Issuance of convertible subordinated notes 143,750
Issuances of common stock 149,221 50,000
------- ------- ------- -------
Net cash provided (used) by financing activities 88,406 38,047 (9,729) (127,209)
------- ------- ------- -------

Net increase (decrease) in cash (425) 2,351 (21,250) 4,385
Cash at the beginning of the period 18,617 16,266 37,516 33,131
------- ------- ------- -------

Cash at the end of the period $ 18,192 $18,617 $ 16,266 $ 37,516
------- ------- ------- -------
------- ------- ------- -------

See accompanying Summary of Significant Accounting Policies and Financial
Review.

CARTER HAWLEY HALE STORES, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Total Accumulated
Earnings (Deficit)
-------------------------
Shares Issued Par Value Accumulated
Warrants ----------------- ------------------ Other Paid- SFAS 87 Earnings
(In thousands) Issued Preferred Common Preferred Common in Capital Adjustment (Deficit)
- - -----------------------------------------------------------------------------------------------------------------------------------

Balance, February 2, 1991 30,369 $ $ 303 $ 643,252 $ (4,306) $ (911,876)
Net loss (216,986)
Net cancellations of common stock
under the stock incentive plan (20) (58)
Adjustment to additional minimum
pension liability (18,805)
-------- --------- -------- -------- -------- -------- -------- ----------
Balance, February 1, 1992 30,349 303 643,194 (23,111) (1,128,862)
Net earnings 1,155,923
Net cancellations of common stock
under the stock incentive plan (868) (9)
Adjustment to additional minimum
pension liability 23,111 (27,061)
Reorganization Plan transactions:
Existing equity holders:
Cancellation of existing
common stock outstanding (29,481) (294) (643,194)
Issuance of new common stock
together with warrants or
preferred stock 1,333 1,143 2,386 11 24 23,965
Issuance of new common stock to
holders of liabilities subject
to settlement 27,600 276 275,724
Additional equity investment 5,000 50 49,950
-------- --------- -------- -------- -------- -------- -------- ----------

Balance, October 3, 1992 1,333 1,143 34,986 11 350 349,639
Net earnings 22,720
Issuances of new common stock 214 2 2,039
Conversions of preferred stock 41 (41)
-------- --------- -------- -------- -------- -------- -------- ----------

Balance, January 30, 1993 1,374 1,102 35,200 11 352 351,678 22,720
Net loss (95,920)
Issuances of new common stock 11,450 114 147,432
Conversion of preferred stock 160 (160) (2) 2
Exercise of stock options 164 2 1,673
Adjustment to additional
minimum pension liability (14,345)
-------- --------- -------- -------- -------- -------- -------- ----------

Balance January 29, 1994 1,534 942 46,814 $ 9 $ 468 $ 500,785 $ (14,345) $ (73,200)
-------- --------- -------- -------- -------- -------- -------- ----------
-------- --------- -------- -------- -------- -------- -------- ----------

See accompanying Summary of Significant Accounting Policies and Financial
Review.

CARTER HAWLEY HALE STORES, INC.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REORGANIZATION

On February 11, 1991 (the "Petition Date"), the Company filed a petition
(the "Filing") for relief under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the Central District of California (the "Bankruptcy
Court"). The Company subsequently managed its affairs and operated its business
under Chapter 11 as a debtor-in-possession while a plan of reorganization was
formulated.

On July 28, 1992, the Company's plan of reorganization ("POR"), which was
supported by the largest secured and unsecured creditors and the official
committee of the equity security holders, was filed with the Bankruptcy Court.
The POR was subsequently confirmed at the Bankruptcy Court hearing held on
September 14, 1992 and became effective October 8, 1992 (the "Emergence Date").

The POR provided for the conversion of substantially all unsecured claims
into 27.6 million shares of Common Stock, the conversion of all common stock
outstanding immediately prior to the Emergence Date ("Old Common Stock") into
2.4 million shares of newly-issued common stock of the Company ("Common Stock")
and a combined total of 2.5 million of convertible warrants or shares of
preferred stock, and the conversion of accrued interest under certain secured
debt agreements into secured long-term obligations in accordance with the
related settlement agreements.

Pursuant to the POR, Zell/Chilmark Fund, L.P. ("Zell/Chilmark"), the
Company's largest unsecured creditor, received 21.2 million shares of Common
Stock in settlement of approximately $461.0 million of unsecured claims on the
Emergence Date. In addition, pursuant to the terms of the Postpetition Store
Modernization Facility Conversion Agreement (the "Conversion Agreement"),
Zell/Chilmark and an institutional investor each acquired an additional 2.5
million shares of Common Stock at a price of $10.00 per share. As of the
Effective Date, 32.4 million shares of Common Stock were issued pursuant to the
POR and the Conversion Agreement, of which Zell/Chilmark owned 73.2 percent. As
of January 29, 1994 Zell/Chilmark owned approximately 54.4% of the Company's
outstanding Common Stock.

BASIS OF REPORTING

The financial statements as of October 3, 1992 (the "Effective Date") and
for the 35 week period then ended reflect the Company's emergence from Chapter
11 and were prepared utilizing the principles of fresh-start reporting contained
in American Institute of Certified Public Accountants' Statement of Position 90-
7 "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
(the "Reorganization Statement"). Operations during the period from October 3,
1992 through the Emergence Date had no significant impact on the emergence
transactions and as a result have not been separately identified. The financial
statements as of October 3, 1992 and for periods ending thereafter have been
segregated from those for prior periods by a solid double line to reflect the
significant change in reporting entity resulting from the application of fresh
start reporting.

Certain amounts reported in prior years have been reclassified in the
accompanying financial statements to conform to the current fiscal year basis of
presentation.

FISCAL YEAR

The Company's fiscal year ends on the Saturday closest to January 31.

CHANGES IN ACCOUNTING POLICIES

During 1993, the Company adopted Statement of Financial Accounting
Standards No. 112 "Employers' Accounting for Postemployment Benefits" ("SFAS No.
112"). This statement establishes standards of financial accounting and
reporting for the estimated costs of benefits provided to former or inactive
employees after employment, but before retirement, and provides for the costs of
such benefits to be accounted for on an accrual basis rather than as
expenditures are made. The Company's practice has been to accrue its obligation
for such benefits of a material nature when circumstances indicate a liability
has been incurred and the amount or range of amounts are reasonably estimable.
As a result, the adoption of SFAS 112 had no impact on the Company's financial
position or results of operations.

During 1992, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Prior to the
adoption of SFAS No. 109, the Company accounted for income taxes under Statement
of Financial Accounting Standards No. 96 ("SFAS No. 96"). Both SFAS No. 109 and
SFAS No. 96 require the use of the liability method of accounting for income
taxes and require the adjustment of previously recorded deferred tax liabilities
and assets for the effects of changes in tax laws or rates through the date of
the latest financial statements presented. SFAS No. 109 changed the criteria
for recognition and measurement of deferred tax assets and allowed the Company
to recognize certain benefits resulting from net operating loss carryforwards
for which no benefit could be recognized under SFAS 96. The cumulative effect
of the change on prior years was a gain of $18.8 million, which has been
reflected in net earnings for the first quarter of 1992.

During 1991, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pension." Effective February 3, 1991, a $32.0 million long term liability for
the postretirement benefits, a $2.0 million reduction of the deferred tax
liability, and a $30.0 million net of tax charge were recorded to reflect the
effects of this change in accounting.

SALES

Sales are net of returns, exclude sales tax, and comprise sales of
merchandise, services, and leased departments. Leased department sales were
$210.7 million in 1993, $88.5 million for the seventeen week period ended
January 30, 1993, $139.3 million for the thirty-five week period ended October
3, 1992, and $224.4 million in 1991.

CUSTOMER ACCOUNTS RECEIVABLE

An account is generally written-off when the aggregate of payments made in
the most recent six months is less than one full monthly scheduled payment, or
when it is otherwise determined that the account is uncollectible.

INVENTORIES

Merchandise inventories are valued at the lower of cost or market, as
determined by the retail method on the last-in, first-out ("LIFO") basis. For
periods subsequent to the Effective Date, the Company utilized internally
developed inflation indices in the computation of LIFO inventories. Prior to
Effective Date, the Company utilized the inflation indices published by the
Bureau of Labor Statistics.

PROPERTY AND EQUIPMENT

Property and equipment additions are recorded at cost and include major
renewals and improvements of a permanent nature. Other renewals and
improvements and maintenance and repairs are expensed.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization are calculated on a straight-line basis over
the estimated useful lives of the property and equipment, or over the terms of
the related leases, if shorter. Debt acquisition costs are amortized over the
life of the related debt.

ADVERTISING AND PROMOTIONAL COSTS

Advertising and promotional costs are generally expensed as incurred except
for certain costs which are deferred over the term of the promotion, generally
three months or less.

INCOME TAXES

Income taxes are recorded in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" which requires,
among other things, the recognition of a deferred tax liability for taxable
temporary differences and a deferred tax asset for deductible temporary
differences. A valuation allowance is recorded to reduce deferred tax assets
when it is more likely than not that all, or some portion, will not be realized.

EARNINGS PER SHARE OF COMMON STOCK

Earnings per share are computed on the basis of the weighted average number
of shares outstanding during the period, including dilutive stock options and
all 35.0 million shares of Common Stock expected to be issued in accordance with
the POR. As of January 29, 1994, 1.2 million shares remain to be issued in
accordance with the POR. Per share data for periods prior to October 3, 1992
have been omitted as these amounts do not reflect the current capital structure.

FINANCIAL REVIEW

NON-RECURRING COSTS

During the current year, the Company also recorded $30.0 million in non-
recurring charges associated with one-time costs expected to be incurred in the
implementation of the strategic plan to streamline the Company. The plan, which
was implemented in 1993, is expected to result in annualized cost savings of
approximately $40.0 million. These cost savings are attributable to the
elimination of redundant and low value-added functions within the support and
administrative areas of the Company. The charge is comprised of severance and
other benefit costs to be incurred from staff reductions, related consulting
fees, and the costs of implementing other efficiencies under the plan.

REORGANIZATION INCOME AND COSTS

In accordance with the Reorganization Statement, income and costs directly
related to the reorganization have been segregated and are separately disclosed.
The major components are as follows:

Period Ended Year Ended
--------------- ----------------
October 3, 1992 February 1, 1992
(In millions) (35 Weeks) (52 Weeks)
- - ----------------------------------------------------------------------------------------

Adjustments to fair value $906.4 $ (9.0)
Provision for consolidation (65.0)
Provision for settlement of disputed claims (8.5) (25.0)
Professional fees and other expenditures
directly related to the Filing (13.8) (29.4)
Write-off of unamortized debt issue
costs on subordinated debentures (9.7)
------ --------

$884.1 $ (138.1)
------ --------
------ --------

The adjustments to fair value reflect the effects of the revaluation of
assets and liabilities in accordance with the Reorganization Statement. These
adjustments which include the $283.4 million write-up of fixed assets and the
net increase of $3.5 million in other balance sheet items result in the
elimination of the remaining $619.5 million accumulated deficit in shareholders'
equity. The $9.0 million adjustment in fiscal 1991 reflects the reduction in
the carrying values of certain assets based on the anticipated effect of the POR
on the amounts to be realized for such assets.

The provision for consolidation is comprised of the estimated costs for the
comprehensive centralization of major management functions. The new management
approach, implemented during 1992, consolidates all corporate, merchandising,
marketing, operations, administration, and support functions into a single
organization.

The provision for settlement of disputed claims represents Management's
estimate of the net amount required to cover all outstanding disputed claims
included in liabilities subject to settlement based on current facts and
circumstances.

Unamortized debt issue costs on subordinated debentures, which totalled
$9.7 million as of the Petition Date, were charged to reorganization costs in
the fourth quarter of 1991 as a result of the claims related to the debt being
allowed by the Bankruptcy Court.

GAIN ON DEBT DISCHARGE

The gain on debt discharge reflects the conversion of $600.0 million of
liabilities subject to settlement into $276.0 million of shareholders' equity
resulting in a $324.0 million gain. The gain is presented net of write-offs and
costs associated with the repayment of borrowings on the Effective Date.

INTEREST EXPENSE, NET

The components of interest expense are as follows:

Year Year
Ended Period Ended Ended
---------- ----------------------------- ----------
January 29, January 30, October 3, February 1,
1994 1993 1992 1992
(In millions) (52 weeks) (17 weeks) (35 weeks) (52 weeks)
- - -----------------------------------------------------------------------------------------------------

Interest on total debt $ 71.3 $ 24.9 $ 54.1 $ 90.1
Imputed interest on capitalized
lease obligations 4.4 1.6 3.4 5.4
Capitalized interest (1.4) (.5) (.4) (1.6)
Amortization of debt
issuance costs 8.3 2.6 4.3 8.3
Commitment fees 1.5 .8
Other .8 .2 (1.2) .1
------- ------- ------- --------
Interest expense, net $ 84.9 $ 29.6 $ 60.2 $ 102.3
------- ------- ------- --------
------- ------- ------- --------

Interest payments, net of amounts capitalized, were $63.8 million in 1993,
$34.0 million in the seventeen week period ended January 30, 1993, $32.8 million
in the thirty-five week period ended October 3, 1992, and $46.6 million in 1991.
As a result of the Filing, interest payments during bankruptcy were limited to
amounts due under the Post-petition Credit Agreement, the Interim Receivables
Facility (during its existence), the Post-petition Receivables Securitization
Facility, and the interest element of capital lease payments made. During
bankruptcy, interest continued to accrue on the Company's secured mortgage debt
but no payments were made. Both the accrual of interest and amortization of
debt issuance costs on the Company's subordinated debt ceased at the Filing.
Unaccrued interest on the subordinated debt amounted to $29.2 million in the
thirty-five weeks ended October 3, 1992, and $42.5 million in 1991. In
accordance with the POR, the liability for such unaccrued interest was cancelled
with no payment due. The remaining $9.7 million of unamortized debt issuance
costs relating to the subordinated debt were written-off as a reorganization
cost in the fourth quarter of 1991.

Commitment fees totalling $1.8 million in the thirty-five week period ended
October 3, 1992 and $3.2 million in 1991 were included in selling, general and
administrative expenses. Such fees are reported as a component of interest
expense for periods subsequent to the Effective Date.

INCOME TAXES

No tax provision was recognized for the year ended January 29, 1994. As a
result of the Company's limited ability to recognize a benefit for the current
year loss, the federal tax benefit for the year was completely offset by a state
provision.

Income taxes for 1992 were required to be separately computed for the pre-
and post-reorganization periods. The $6.8 million tax benefit recognized for
the thirty-five week period ended October 3, 1992 reflects the reversal of
certain tax reserves on favorable resolution of income tax audits for tax years
through July 1990.

Current
Federal $ $ $ (6.8) $
State .1
-------- -------- -------- --------
-- .1 (6.8) --
-------- -------- -------- --------
Deferred
Federal (2.6) 11.6
State 2.6 4.9
-------- -------- -------- --------
-- 16.5 -- --
-------- -------- -------- --------

Income tax expense (benefit) $ -- $ 16.6 $ (6.8) $ --
-------- -------- -------- --------
-------- -------- -------- --------

The limited ability to utilize net operating loss carryforwards in certain
periods is reflected in the following analyses of the effective income tax rate
reconciliation and the composition of deferred income tax liability.

Year Year
Ended Period Ended Ended
---------- ----------------------------- ----------
January 29, January 30, October 3, February 1,
1994 1993 1992 1992
(Percent of pre-tax earnings) (52 weeks) (17 weeks) (35 weeks) (52 weeks)
- - -----------------------------------------------------------------------------------------------------

Federal income tax at
statutory rate (35.0)% 34.0% (34.0)% (34.0)%
State income taxes 2.7 8.4
Losses for which no benefit
is recognized 32.3 34.0 34.0
Adjustments to taxes
previously recorded (.8)
Other, net (.2)
-------- -------- -------- --------
Effective income tax rate --% 42.2% (.8)% --%
-------- -------- -------- --------
-------- -------- -------- --------

In the current year, a valuation allowance was established to offset all
but $2.6 million of federal tax benefits related to the loss from continuing
operations recorded in the current year. The change in the federal corporate
rate from 34 percent to 35 percent, resulting from legislation passed during the
current year, did not have a significant impact on the federal deferred tax
liability. The principal items comprising the deferred tax liability are as
follows:

January 29, January 30,
(In millions) 1994 1993
- - --------------------------------------------------------------------------------------

Property and equipment $ 194.7 $ 178.5
Inventories 36.8 32.5
Other 9.6 7.8
-------- --------
Gross deferred tax liability 241.1 218.8
-------- --------

Employee benefits (60.7) (52.1)
Unscheduled claims (4.9) (6.1)
Short-period loss (8.5) (10.0)
Accounts receivable (7.6) (7.5)
Restructuring reserves (5.0) (9.3)
Earthquake (3.4)
Loss carryforwards (165.9) (112.4)
Credit carryforwards (7.9) (3.9)
Other (8.2) (5.0)
-------- --------

Gross deferred tax asset (272.1) (206.3)
-------- --------

SFAS 109 valuation allowance 45.9
-------- --------

Net deferred tax liability $ 14.9 $ 12.5
-------- --------
-------- --------

The Company has estimated tax basis net operating loss carryforwards of
$495.0 million for federal purposes which expire in the years 2004 through 2008.
As of the Emergence Date, the Company experienced a change of ownership which
restricts the Company's ability to utilize its net operating loss carryforwards
in future years. The Company has federal business credit carryforwards of $3.6
million which expire in the years 2002 through 2005 and an alternative minimum
tax credit carryforward of $1.0 million which carries over indefinitely.

The Company has California net operating loss carryforwards of $229.0
million which expire in the years 1996 through 2002. In the current year, the
net operating loss carryforward period was legislately reduced to five years.
This change is effective for the Company's net operating losses generated in the
current year and future years. This change many further restrict the Company's
ability to use its California net operating losses.

Income tax payments were $.2 million in 1993, $.2 million and $.1 million
in the seventeen and thirty-five week periods comprising the fiscal year ended
January 30, 1993 and $.1 million in 1991.

ACCOUNTS RECEIVABLE AND CREDIT OPERATIONS

Accounts receivable consist of the following:

January 29, January 30,
(In millions) 1994 1993
- - --------------------------------------------------------------------------------------

Customer receivables $ 578.3 $ 580.6
Other receivables 66.3 16.5
-------- --------
644.6 597.1
Less allowance for doubtful accounts (17.2) (17.3)
-------- --------

Accounts receivable, net $ 627.4 $ 579.8
-------- --------
-------- --------

Other receivables at January 30, 1994 include $50.4 million in estimated
earthquake insurance recoveries.

Selected credit operations information is as follows:

Credit sales as a percent of
gross sales 51.7% 52.7% 52.0% 53.8%
Uncollectible account losses,
net of recoveries, as a
percent of credit sales 2.5% 2.2% 3.6% 3.1%

The Company's proprietary credit card penetration has eroded 2.1% during
the past three years, from 53.8% of gross sales in fiscal 1991 to 51.7% in the
current year. In part, this reflects the weakness in the California economy
which resulted in lower levels of consumer confidence and decreased total credit
sales. In addition, it reflects the wider use of third party bank cards.
Current year write-offs at 2.5% of credit sales improved from 3.0% for the
fifty-two week period ended January 30, 1993 reflecting improved collections and
a decrease in the level of personal bankruptcies experienced in the prior year.

INVENTORIES

The LIFO method of accounting resulted in a credit to cost of goods sold of
$8.9 million in the current year compared to a credit of $1.9 million for the
seventeen weeks ended January 30, 1993 and charges of $7.1 million for the
thirty-five weeks ended October 3, 1992 and $5.2 million in 1991. If all
inventories had been valued on the first-in, first-out ("FIFO") basis, they
would have been lower by $10.8 million at January 29, 1994, lower by $1.9
million at January 30, 1993 and higher by $79.8 million at February 1, 1992.

In accordance with the principles of fresh start reporting, merchandise
inventories at October 3, 1992 were restated at fair market value, resulting in
elimination of the LIFO reserve at that date.

LEASES

Certain Company operations are conducted in leased properties, which
include retail stores, distribution centers, and office facilities. Leases are
generally for periods of up to thirty years, with renewal options for
substantial periods. Leases are generally at fixed rental rates, except that
certain leases provide for additional rental charges based on sales in excess of
predetermined levels.

Rent expense for each period is as follows:

Year Year
Ended Period Ended Ended
---------- ----------------------- -----------

January 29, January 30, October 3, February 1,
1994 1993 1992 1992
(In millions) (52 weeks) (17 weeks) (35 weeks) (52 weeks)
- - ---------------------------------------------------------------------------------------
Minimum rent $ 21.4 $ 8.2 $ 18.0 $ 31.0
Rent based on sales .7 .4 .4 .9
--------- --------- --------- -------

Total rent expense $ 22.1 $ 8.6 $ 18.4 $ 31.9
--------- --------- --------- -------
--------- --------- --------- -------

Future minimum lease payments are as follows:

Capital Operating
(In millions) Leases Leases
- - ---------------------------------------------------------------------------------------

1994 $ 7.1 $ 22.5
1995 7.1 22.3
1996 6.9 22.5
1997 6.9 24.2
1998 6.6 24.2
Thereafter 49.5 294.9
-------- ----------

Total future minimum lease obligations $ 84.1 $ 410.6
-------- ----------
-------- ----------

Present value, including $2.9 million current
portion of capital lease obligations $47.6 $158.8
-------- ----------
-------- ----------

PROPERTY AND EQUIPMENT, NET

Property and equipment was adjusted to fair market value at October 3,
1992. The revaluation resulted in a net increase in property and equipment of
$283.4 million, including the elimination of all accumulated depreciation.

Property and equipment is as follows:

January 29, January 30,
(In millions) 1994 1993
- - ---------------------------------------------------------------------------------------

Land $ 121.7 $ 121.7
Buildings and improvements 358.8 348.9
Leasehold improvements 57.4 59.4
Fixtures and equipment 144.9 103.8
Construction in progress 9.9 9.6
Leased property under capital leases,
primarily buildings 38.5 38.5
Revalued leases 112.5 114.1
---------- -----------

843.7 796.0
Less accumulated depreciation and
amortization 33.1 7.9
---------- -----------

Property and equipment, net $ 810.6 $ 788.1
---------- -----------
---------- -----------

Capital expenditures were as follows:

Year Year
Ended Period Ended Ended
------------ ------------------------------ ------------
January 29, January 30, October 3, February 1,
1994 1993 1992 1992
(In millions) (52 weeks) (17 weeks) (35 weeks) (52 weeks)
- - ---------------------------------------------------------------------------------------------

New stores $ $ $ $ 2.2
Store and support facility
modernization 60.0 21.2 17.0 32.7
---------- ---------- ---------- ----------

Total capital expenditures $ 60.0 $ 21.2 $ 17.0 $ 34.9
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Expenditures for new stores include acquisition costs of land, buildings
and improvements, and related fixtures and equipment. Store and support
facility modernization expenditures include renovating, expanding, and
re-equipping existing stores and expenditures for improvements and fixtures for
office buildings, distribution centers, and other facilities.

CREDIT FACILITY

On October 8, 1992, a three year facility (the "Credit Facility") provided
by General Electric Capital Corporation ("GE Capital") replaced the existing
debtor-in-possession working capital facility. The facility provides for up to
$225.0 million in working capital borrowings secured on a first priority basis
by substantially all of CHH's tangible and intangible personal property.
Interest is computed at a rate equivalent to one and one-half percent above the
GE Capital index rate. In addition, the facility includes a commitment fee of
one-half percent on the unused portion of the credit line. The facility also
requires the payment of administrative fees and line-of-credit fees equivalent
to 2.375 percent of the face amount of letter-of-credit obligations. In
addition, the facility includes restrictions on capital expenditures and
dividends and includes covenants for material adverse changes, minimum aggregate
net cash flow and earnings before interest, taxes, depreciation and
amortization. As of January 29, 1994, there were $48.3 million in outstanding
letters of credit and zero borrowings outstanding under the Credit Facility. As
of January 30, 1993, there were $45.1 million in outstanding letters of credit
and $52.3 million in advances under the Credit Facility.

LONG-TERM DEBT

Long-term debt comprises:

January 29, January 30,
(In millions) 1994 1993
- - ------------------------------------------------------------------------------------------

Receivables based financing $ 332.2 $ 467.6
---------- -----------
---------- -----------

Other secured long-term debt
Term loans due in 1999 (3.875 percent at
January 29, 1994 and January 30, 1993) $ 89.7 $ 89.7
9.0 percent notes due 1997-2002 68.5 56.8
9.9 percent notes due 1994-2010 9.4 9.4
10.67 percent notes due 1997-2002 344.0 344.0
9.0 percent notes paid during 1993 9.8
Other notes (8.25 percent to 9.9 percent at
January 29, 1994 and January 30, 1993) 6.3 10.1
---------- -----------
517.9 519.8
Current portion of long-term debt .6 4.1
---------- -----------

$ 517.3 $ 515.7
---------- -----------
---------- -----------
6.25 percent convertible senior subordinated
notes due 2000 $ 143.8
----------
----------

On October 8, 1992, a three year $575.0 million facility provided by GE
Capital replaced the postpetition receivables securitization facility. The GE
Capital facility provides for Blue-Hawk Funding Corporation, a limited purpose
corporation not affiliated with the Company, to acquire interests in the
Company's credit card receivables and pay for these interests through the
issuance of commercial paper. Outstanding borrowings under the postpetition
receivables securitization facility, which are secured by substantially all of
the Company's customer receivables, accrue interest at the A-1/P-1 commercial
paper rate plus 1.1%. At January 29, 1994, the weighted average interest rate
for borrowings under the postpetition receivables securitization facility was
4.3%. Costs of $13.9 million related to origination of the receivables
financing facility were capitalized and are being amortized to interest expense
over the term of the facility.

The financial statements for the fifty-two weeks ended February 1, 1992
reflect a $16.9 million net-of-tax extraordinary loss on unamortized debt issue
costs written-off as a result of the replacement of the interim receivables
facility established at the time of Filing.

On December 31, 1991,the Company and Prudential concluded the Prudential
Settlement Agreement with respect to the $344.0 million of notes (the "Existing
Notes") due 1993 to 1997. The Prudential Settlement Agreement, which became
effective on October 8, 1992, extended the maturity of the notes for five years
to October 2002. In addition, previously accrued and unpaid interest and
certain other charges totalling $53.4 million were capitalized into a 9 percent
note (the "Accrued Interest Note"). Principal payments on the Accrued Interest
Note will commence in November 1997, continuing in equal monthly installments
through October 2002. Although the Existing Notes will continue to accrue
interest at the blended contract rate of 10.67 percent during the first two
years following the Emergence Date, the Company will only be required to pay
interest at a lower rate of 7.5 percent (the "Pay Rate"). The difference
between the Pay Rate and the blended contract rate amounts to $23.8 million and
is being capitalized under the terms of the Accrued Interest Note with principal
payments commencing in November 1997 and continuing in equal installments over
the remaining life of the notes.

On July 28, 1992, the Company and BofA concluded the BofA Settlement
Agreement with respect to the $89.7 million of term loans due in 1995. The BofA
Settlement Agreement, which became effective on October 8, 1992, extends the
maturity of the term loans for four years to June 1999. In accordance with the
BofA Settlement Agreement, interest from October 8, 1992 through June 30, 1995,
will be payable at LIBOR plus .625 percent and thereafter at LIBOR plus 1.25
percent. Previously accrued and unpaid interest on the term loans and other
negotiated charges totalling $10.8 million were capitalized in a 9 percent note
which was paid in 1993.

On December 21, 1993, the Company issued and sold $143.75 million of 6.25%
Convertible Senior Subordinated Notes due December 31, 2000 (the "Notes").
Interest on the Notes will be paid semi-annually on December 31 and June 30 of
each year, commencing June 30, 1994. The Notes are convertible at the option of
the holder thereof at any time after 90 days following the date of original
issuance thereof and prior to maturity, unless previously redeemed, into shares
of Common Stock, at a conversion price of $12.19 per share, subject to
adjustment in certain events.

The notes are redeemable at the option of the Company, in whole or in part,
at any time on and after December 31, 1998, at a redemption price equal to 100%
of the principal amount thereof, together with accrued and unpaid interest. The
Notes do not provide for any sinking fund. Upon a Change in Control (as defined
in the Registration Statement), holders of the Notes will have the right,
subject to certain restrictions and conditions, to require the Company to
purchase all or any part of the Notes at the principal amount thereof together
with accrued and unpaid interest to the date of purchase.

Principal maturities of long-term debt payable over the next five years,
exclusive of borrowings under the post-emergence receivables securitization
facility due 1995 and the Notes due 2000, are $.6 million in 1994, $3.9 million
in 1995, $5.4 million in 1996, $9.9 million in 1997, $21.6 million in 1998, with
$476.5 million due thereafter.

Long-term debt of $517.9 million is secured by property with a net carrying
value of $482.7 million.

The Company's debt agreements include restrictions on capital expenditures
and covenants for minimum aggregate net cash flow and earnings before interest,
taxes, depreciation and amortization.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107 ("SFAS No. 107")
requires the disclosure of fair value of financial instruments for which it is
practical to estimate that value. The Company's various long term debt
liabilities constitute the only financial instruments with a potential carrying
value different from fair value. Based upon the following methods and
assumptions, as of January 29, 1994, the carrying value of such financial
instruments are estimated to approximate market value.

RECEIVABLES BASED FINANCING - Financings under this facility bear
interest at floating rates which reflect short term market rate
changes. As a result, it is assumed that the carrying value of the
$332.2 million of financings outstanding at January 29, 1994
approximate fair value.

SECURED LONG-TERM DEBT - The $517.9 million of secured long-term debt
outstanding comprises real estate secured borrowings with a carrying
value based on the valuations provided in the POR, implemented
effective October 8, 1992. Except for $89.7 million of borrowings
which bear interest at LIBOR plus 0.625%, all other borrowings are at
fixed rates from 8.25% to 10.67%. Since the debt is not publicly
traded and there have been no real estate financings concluded
subsequent to the 1992 reorganization, the Company has assumed that
the carrying values established under the POR continue to reflect fair
value.

CONVERTIBLE SENIOR SUBORDINATED NOTES - These notes, were issued in a
private placement during December 1993, and are assumed to reflect
fair value at January 29, 1994.

RETIREMENT PLANS

The Company has two qualified noncontributory pension plans covering
substantially all employees. Employees who have completed one year of
employment, are at least 21 years of age, and are not covered by a collectively
bargained pension plan, are covered by the plans and become vested for benefit
purposes after completing five years of employment with the Company. The
Company also has unfunded nonqualified pension plans covering certain employees
and directors. The Company contributes at least the actuarially determined
minimum amount necessary to fund participants' benefits in accordance with the
requirements of the Employee Retirement Income Security Act of 1974.

Effective January 29, 1994, changes were made to the significant actuarial
assumptions used in development of the pension plans funded status as of that
date and for computation of pension expense for future periods. The discount
factor used to compute the present value of pension liabilities was reduced from
8.5 percent to 7.25 percent, reflecting the reduction in long-term rates
experienced during 1993. Lower actual and expected rates of inflation also
resulted in reductions to the long-term rate of return on assets from 9.5
percent to 9.25 percent and in the projected rate of compensation increases from
5.0 percent to 4.5 percent.

The above changes resulted in a $27.1 million increase to the pension
liability of which $14.3 million was charged directly to equity as a separate
component of the Total Accumulated Deficit.

The following table summarizes pension expense and funded status of the
plans, as determined by the Company's actuary, together with an analysis of the
significant actuarial assumptions used:

Year Year
Ended Period Ended Ended
--------- ------------------------------ ------------
January 29, January 30, October 3, February 1,
1994 1993 1992 1992
(In millions) (52 weeks) (17 weeks) (35 weeks) (52 weeks)
- - --------------------------------------------------------------------------------------------------------

Net periodic pension expense
Service cost $ 3.8 $ 1.3 $ 2.7 $ 3.7
Interest cost on projected
benefit obligation 14.6 4.7 9.5 14.0
Actual net return on assets (13.1) (4.9) (3.6) (14.1)
Net amortization (deferral) 3.6 2.0 7.9
--------- ----------- ---------- ----------

Net pension expense $ 8.9 $ 3.1 $ 8.6 $ 11.5
--------- ----------- ---------- ----------
--------- ----------- ---------- ----------

Funded status of plans
Accumulated benefit obligation
Vested benefits $ (203.7) $ (167.1) $ (166.1) $ (161.7)
Nonvested benefits (3.7) (4.0) (4.9) (4.5)
--------- ----------- ---------- ----------
(207.4) (171.1) (171.0) (166.2)
Additional amounts relating to
projected compensation
increase (13.2) (11.1) (12.1) (16.8)
--------- ----------- ---------- ----------
Actuarial present value of
projected benefit obligation (220.6) (182.2) (183.1) (183.0)
Market value of plan assets 114.0 102.9 97.4 94.4
--------- ----------- ---------- ----------

Funded status (106.6) (79.3) (85.7) (88.6)
Unrecognized net (gain) loss 27.2 (4.0) 40.6
Unrecognized net obligation
at initial date of application
of SFAS No. 87 25.8
Unrecognized prior service costs 3.3
Additional minimum liability recognized
under SFAS No. 87 (14.8) (52.9)
--------- ----------- ---------- ----------

Pension liability $ (94.2) $ (83.3) $ (85.7) $ (71.8)
--------- ----------- ---------- ----------
--------- ----------- ---------- ----------

Significant actuarial assumptions
Discount rate 7.25% 8.5% 8.5% 8.5%
Long-term rate of return on assets 9.25 9.5 9.5 9.5
Projected rate of compensation
increases 4.50 5.0 5.0 5.0

As of January 29, 1994, the $106.6 million unfunded projected benefit
obligation consisted of $68.2 million relating to the qualified plans and $38.4
million relating to the nonqualified plans.

Certain retired employees also receive health care and life insurance
benefits which are subsidized to varying degrees by the Company. The post-
retirement medical benefits are available only to employees who had retired or
were eligible to retire by August 1, 1991 and who had met all other plan
eligibility requirements. A life insurance benefit of $1,000 per employee is
provided by the Company to all eligible current and retired employees.
Additional life insurance benefits are also provided to a select group of
executives. The executive life benefits were amended effective January 1993, to
reduce the amount of

coverage post-retirement, based on age. The amendment which applies to both
current retirees and eligible plan participants resulted in a $1.9 million
reduction to the January 30, 1993 accumulated benefit obligation. This gain is
being amortized as a reduction in post-retirement benefit expense on a straight
line basis over a ten year period representing the average service period to
full eligibility for this benefit.

The following table summarizes the expense and the accumulated benefit
obligation for these plans.

Year Year
Ended Period Ended Ended
----------- -------------------------- ------------
January 29, January 30, October 3, February 1,
1994 1993 1992 1992
(In millions) (52 weeks) (17 weeks) (35 weeks) (52 weeks)
- - --------------------------------------------------------------------------------------------------

Medical Plan Benefits
- - ---------------------
Interest cost representing net
periodic plan expense $ 2.2 $ .7 $ 1.5 $ 2.3
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------

Accumulated benefit obligation
at period end:
Retirees $ (25.2) $ (24.7) $ (24.8) $ (25.0)
Fully eligible active plan
participants (1.0) (1.2) (1.2) (1.2)
Other active plan participants (.1) (.1) (.1)
Unrecognized net loss .6 .1
----------- ------------ ----------- -----------

Accrued benefit liability $ (25.7) $ (25.9) $ (26.1) $ (26.2)
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------

Life Insurance Benefits
- - -----------------------
Net periodic plan expense:
Service cost $ .1 $ $ .2 $ .2
Interest cost .4 .2 .3 .4
Amortization of prior service
gain (.2)
----------- ------------ ----------- -----------
$ .3 $ .2 $ .5 .6
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------

Accumulated benefit obligation
at period end:
Retirees $ (4.4) $ (3.0) $ (4.0) $ (3.9)
Fully eligible active plan
participants (.5) (.6) (1.2) (1.2)
Other active plan participants (.3) (.4) (.7) (.7)
Unrecognized prior service
gain (1.7) (1.9)
Unrecognized net loss .8
----------- ------------ ----------- -----------
Accrued benefit liability $ (6.1) $ (5.9) $ (5.9) $ (5.8)
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------

The postretirement medical and life insurance benefits are provided under
nonqualified plans. The accumulated benefit obligation represents the present
value of expected future payments discounted at a 7.25 percent rate. Medical
inflation has been projected at a blended rate of twelve percent per annum for
fiscal 1994, declining by 2001 to a long term rate of approximately six and
one-half percent per annum. The effect of a one-percentage-point increase in
the assumed medical cost trend rate would be to increase the net periodic
medical plan expense by $.2 million and to increase the related accumulated
benefit obligation by $2.5 million.

A 401(k) savings and investment plan is available to substantially all
employees who have completed one year of service. For eligible participant
contributions made during the nine month period ended December 1993, the Company
will be providing a 25 percent matching contribution in the form of newly issued
shares of Company common stock. No Company match was provided on participant
contributions made during the period from the Petition Date through March 1993.

At January 29, 1994, the plan held .6 million shares of Common Stock
representing 1.2 percent of common stock outstanding or still issuable under the
POR and .6 million shares of preferred stock representing 60.3 percent of
preferred shares outstanding or still issuable under the POR.

EMPLOYEE STOCK INCENTIVE PLANS

As of the Effective Date, the Company adopted a new long-term incentive
compensation plan designed to attract and retain top-quality management for the
reorganized Company. The plan, among other things, provides for the issuance of
stock options at an exercise price that is generally not less than the market
value of the common stock on the date of grant. During the fifty-two week
period ended January 29, 1994, 3.2 million options were awarded and 163,664
options were exercised under the plan. As of January 29, 1994, 1.4 million
options were outstanding and exercisable at exercise prices ranging from $10.22
to $11.00. The options, which vest in one-third increments over three years,
are exercisable over a ten year period, generally beginning one year from the
date of grant.

In accordance with the POR, all rights and benefits earned under the stock
incentive plans in existence prior to the Effective Date were cancelled.

CONTINGENCIES

Notwithstanding the confirmation and effectiveness of the POR, the
Bankruptcy Court continues to have jurisdiction to, among other things, resolve
disputed prepetition claims against the Company and to resolve other matters
that may arise in connection with or relate to the POR.

PREFERRED STOCK AND WARRANTS

Pursuant to the POR, shares of Series A exchangeable preferred stock, par
value $.01 ("Preferred Stock") or warrants to purchase shares of Common Stock
("Warrants") were issuable to existing holders of Old Common Stock at a rate of
.084 for each share of Old Common Stock held. The Company does not intend to
have the preferred stock listed for trading on any national securities exchange
or other national automated quotation system. The Warrants have been registered
and listed for trading on the New York and Pacific Stock Exchanges.

At the option of the holders of Preferred Stock, shares of Preferred Stock
are exchangeable on a one-for-one basis to Warrants to purchase Common Stock.
During 1993, approximately 160,000 shares of Preferred Stock were converted to
warrants. The Company does not expect ever to pay a dividend with respect to
the Preferred Stock. In the event of dissolution, liquidation, or winding-up,
the holders of Preferred Stock are entitled to a liquidation preference of $0.25
per share from assets remaining after the full satisfaction of the prior rights
of creditors. As of January 29, 1994, the authorized Preferred Stock of the
Company consisted of twenty-five million shares, $.01 par value, of which .9
million shares were issued and outstanding.

Each Warrant entitles the holder any time prior to the close of business on
October 8, 1999, to purchase a share of Common Stock at a purchase price equal
to $17.00 per share, subject to adjustment from time to time. In the event the
market price of the common stock equals or exceeds $25.50 per share for 30
consecutive trading days, the Board of Directors, after the passage of 30 months
from October 8, 1992, may, upon 75 days notice, shorten the exercise period to
end on a date earlier than October 8, 1999.

COMMON STOCK

Pursuant to the POR, effective October 8, 1992, all existing shares of Old
Common Stock were converted into 2.4 million shares of Common Stock and a
combined total of 2.5 million in warrants or shares of convertible preferred
stock. Unsecured claims were converted into approximately 27.6 million shares
of new Common Stock. In addition, in accordance with the POR Zell/Chilmark and
an institutional investor each acquired an additional 2.5 million shares of new
common stock at a price of $10.00 per share.

In addition, shortly after the Effective Date, 80,000 shares of Common
Stock were issued as bonus compensation to certain professionals engaged in the
Chapter 11 proceedings, and a total of approximately 134,000 shares of Common
Stock were issued to employees. In December 1992, all eligible employees each
received ten shares of Common Stock as a result of this stock issuance.

In July 1993, the Company raised net proceeds of $147.5 million through a
public offering of 11.45 million shares of Common Stock.

The accompanying financial statements reflect the issuance of all shares of
Common Stock, preferred stock, and warrants contemplated by the POR. As of
January 29, 1994, up to 1.2 million shares of Common Stock, .1 million shares of
Preferred Stock, and .1 million Warrants remain issuable under the POR to
satisfy outstanding claims and conversion of unpresented shares of Old Common
Stock. At January 29, 1994, the Company's authorized common stock consisted of
100 million shares, $.01 par value of which 5.9 million shares were reserved
under the employee stock incentive plan, 1.5 million shares were reserved for
purchase by and contribution to the Company's 401(k) Savings & Investment Plan
and 2.5 million shares were reserved for purchase by warrant holders.

The Company's ability to pay dividends on its common stock is restricted
pursuant to the terms of the post-reorganization credit facilities and the BofA
Settlement Agreement. As a result, the Company does not expect to pay common
stock dividends for the foreseeable future.

CARTER HAWLEY HALE STORES, INC.

SCHEDULE II -- ACCOUNTS RECEIVABLE FROM RELATED PARTIES

Balance at Balance
Beginning at End
(In thousands) of Period Additions Reductions of Period
- - -------------- --------- --------- ---------- ---------

Fiscal year ended
January 29, 1994
Robert J. Lambert(1) $ - $ 100 $ - $ 100
--------- --------- ---------- ---------
--------- --------- ---------- ---------

Seventeen weeks ended
January 30, 1993 $ - $ - $ - $ -
--------- --------- ---------- ---------
--------- --------- ---------- ---------

Thirty-five weeks ended
October 3, 1992
Participants in the
1987 Stock Incentive
Plan (2) $ 9,072 $ - $ (9,072) $ -
--------- --------- ---------- ---------
--------- --------- ---------- ---------

Fiscal year ended
February 1, 1992
Participants in the 1987
Stock Incentive Plan (2) $ 9,187 $ - $ (115) $ 9,072
--------- --------- ---------- ---------
--------- --------- ---------- ---------
John M. Gailys (3) $ 104 $ - $ (104) $ -
--------- --------- ---------- ---------
--------- --------- ---------- ---------

(1) In fiscal 1993, the company made a loan of $100,000 to Mr. Robert J.
Lambert, Executive Vice President, Human Resources. The unsecured,
interest free loan is being forgiven at a rate of $2,778 per month of
active employment.

(2) The 1987 Stock Incentive Plan provided for the issuance of stock purchase
rights to eligible participants. In connection with the exercise of such
stock purchase rights, participants were issued shares of Old Common Stock
in exchange for non-recourse notes. The notes were reflected as a
reduction in shareholders' equity. Pursuant to the POR, the stock rights
and non-recourse notes were cancelled on the Emergence Date.

(3) In 1990, the Company made a loan of $104,000 to Mr. John M. Gailys,
Executive Vice President and Chief Financial Officer of the Company. The
loan was repaid prior to Mr. Gailys' resignation from the Company in fiscal
1991.

CARTER HAWLEY HALE STORES, INC.

SCHEDULE V--PROPERTY AND EQUIPMENT

Balance at Sales and Balance
Beginning Additions Other at End
(In thousands) of Period at Cost Retirements Changes(1) of Period
-------------- ---------- ------- ----------- ---------- ----------

Fiscal year ended January 29, 1994:
Land $ 121,691 $ $ $ $ 121,691
Buildings and improvements 348,888 9,952 358,840
Leasehold improvements 59,400 (6,557) 4,543 57,386
Fixtures and equipment 103,848 (8) 41,078 144,918
Construction in progress 9,562 59,957 (59,653) 9,866
Leased properties under capital
leases, primarily buildings 38,482 38,482
Revalued leases 114,115 (1,567) 112,548
---------- ---------- ---------- ---------- ----------
$ 795,986 $ 59,957 $ (6,565) $ (5,647) $ 843,731
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Seventeen week period ended
January 30, 1993:
Land $ 121,691 $ $ $ $ 121,691
Buildings and improvements 344,412 4,476 348,888
Leasehold improvements 58,926 (3,712) 4,186 59,400
Fixtures and equipment 88,118 (719) 16,449 103,848
Construction in progress 16,410 21,190 (28,038) 9,562
Leased properties under capital
leases, primarily buildings 41,161 (2,679) 38,482
Revalued leases 114,115 114,115
---------- ---------- ---------- ---------- ----------

$ 784,833 $ 21,190 $ (7,110) $ (2,927) $ 795,986
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Thirty-five week period ended
October 3, 1992:
Land $ 37,387 $ $ $ 84,304 $ 121,691
Buildings and improvements 378,057 (5,643) (28,002) 344,412
Leasehold improvements 80,057 (21,131) 58,926
Fixtures and equipment 411,763 (332) (323,313) 88,118
Construction in progress 28,225 17,052 (28,867) 16,410
Leased properties under capital
leases, primarily buildings 87,641 (46,480) 41,161
Revalued leases 114,115 114,115
---------- ---------- ---------- ---------- ----------
$1,023,130 $ 17,052 $ (5,975) $ (249,374) $ 784,833
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Fiscal year ended February 1, 1992:
Land $ 36,246 $ $ $ 1,141 $ 37,387
Buildings and improvements 358,537 19,520 378,057
Leasehold improvements 76,838 3,219 80,057
Fixtures and equipment 393,734 18,029 411,763
Construction in progress 41,760 34,850 (48,385) 28,225
Leased properties under capital
leases, primarily buildings 96,191 (3,300) (5,250) 87,641
---------- ---------- ---------- ---------- ----------

$1,003,306 $ 34,850 $ (3,300) $ (11,726) $1,023,130
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

(1) Sales and other changes reflect the following items:
- Effective October 3, 1992, the adjustment required to record
property and equipment at fair value in accordance with the
Reorganization Statement.
- Fixed asset sales completed during the period.
- Write-off of assets in connection with lease rejections completed
during the year ended February 1, 1992.
- Reclassification of costs from construction in progress for
projects completed during the period.
- Reclassification of costs relating to properties purchased during
the period which previously were operated under capital leases.

CARTER HAWLEY HALE STORES, INC.
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT

Additions
Balance at Charged to Sales and Balance
Beginning Costs and Other at End
(In thousands) of Period Expenses Retirements Changes(1) of Period
-------------- ---------- ---------- ----------- ------- ---------

Fiscal year ended January 29, 1994
Buildings and improvements . . . . . . . $ 2,459 $ 7,473 $ $ (62) $ 9,870
Leasehold improvements . . . . . . . . . 514 1,585 (143) (18) 1,938
Fixtures and equipment . . . . . . . . . 3,833 13,430 (54) 17,209
Leased properties under capital
leases, primarily buildings. . . . . . 724 2,171 2,895
Revalued leases. . . . . . . . . . . . . 327 1,044 (160) 1,211
--------- --------- --------- --------- ---------

$ 7,857 $ 25,703 $ (143) $ (294) $ 33,123
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

Seventeen week period ended
January 30, 1993
Buildings and improvements . . . . . . . $ $ 2,459 $ $ $ 2,459
Leasehold improvements . . . . . . . . . 559 (45) 514
Fixtures and equipment . . . . . . . . . 3,880 (47) 3,833
Leased properties under capital
leases, primarily buildings. . . . . . 756 (32) 724
Revalued leases. . . . . . . . . . . . . 327 327
--------- --------- --------- --------- ---------

$ -- $ 7,981 $ (124) $ -- $ 7,857
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

Thirty-five week period ended
October 3, 1992
Buildings and improvements . . . . . . . $ 130,205 $ 5,823 $ (2,586) $(133,442) $
Leasehold improvements . . . . . . . . . 20,893 1,644 (22,537)
Fixtures and equipment . . . . . . . . . 317,940 12,435 (87) (330,288)
Leased properties under capital
leases, primarily buildings. . . . . . 44,903 1,577 (46,480)
--------- --------- --------- --------- ---------
$ 513,941 $ 21,479 $ (2,673) $(532,747) $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

Fiscal year ended February 1, 1992
Buildings and improvements . . . . . . . $ 121,592 $ 8,613 $ $ $ 130,205
Leasehold improvements . . . . . . . . . 17,744 2,479 670 20,893
Fixtures and equipment . . . . . . . . . 303,698 19,180 (4,938) 317,940
Leased properties under capital
leases, primarily buildings. . . . . . 48,582 2,450 (3,300) (2,829) 44,903
--------- --------- --------- --------- ---------
$ 491,616 $ 32,722 $ (3,300) $ (7,097) $ 513,941
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

<FN>
(1) Sales and other changes reflect the following items:
- Effective October 3, 1992, the adjustment required to record property
and equipment at fair value in accordance with the Reorganization
Statement.
- Fixed asset sales completed during the period.
- Write off of assets in connection with lease rejections completed
during the year ended February 1, 1992.
- Reclassification of costs relating to properties purchased during the
period which previously were operated under capital leases.

CARTER HAWLEY HALE STORES, INC.

SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

Balance Additions Accounts Balance
At Charged to Charged At
Beginning Costs and off Less End
(In thousands) of Period Expenses Recoveries Other of Period
-------------- --------- ---------- ---------- ----- ---------

Fiscal year ended January 29, 1994 . . . . $ 17,300 $ 29,545 $ 29,621 $ $ 17,224
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Seventeen week period ended
January 30, 1993
Allowance for doubtful
accounts . . . . . . . . . . . . . . . $ 14,583 $ 14,133 $ 11,416 $ $ 17,300
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

Thirty-five week period ended
October 3, 1992
Allowance for doubtful
accounts . . . . . . . . . . . . . . . $ 16,605 $ 22,277 $ 25,271 $ 972(1) $ 14,583
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

Fiscal year ended February 1, 1992
Allowance for doubtful
accounts . . . . . . . . . . . . . . . $ 13,355 $ 41,753 $ 38,503 $ $ 16,605
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

<FN>
(1) Adjusted to fair value in accordance with the Reorganization Statement.

CARTER HAWLEY HALE STORES, INC.

SCHEDULE IX--SHORT-TERM BORROWINGS

Weighted
Weighted Maximum Average Average
Balance Average Amount Amount Interest
at Interest Outstanding Outstanding Rate
End of Rate at End During the During the During the
(Dollar amounts in thousands) Period of Period Period (1) Period (2) Period (2)
- - ----------------------------- ------- ----------- ----------- ----------- ----------

Fiscal year ended January 29, 1994
Borrowings(3). . . . . . . . . . . . . . . . $ 0 7.5% $ 114,535 $ 54,893 7.5%
Receivables Securitization Facility(4) . . . 332,182 4.3 440,034 397,061 4.3

Seventeen week period ended
January 30, 1993
Borrowings(3). . . . . . . . . . . . . . . . 52,315 7.5 136,000 75,038 7.5
Receivables Securitization Facility(4) . . . 467,577 4.3 519,120 442,269 4.6

Thirty-five week period ended
October 3, 1992
Borrowings . . . . . . . . . . . . . . . . . 90,800(3) 7.5(3) 111,000(5) 58,795(5) 7.7(5)
Receivables Securitization Facility. . . . . 388,306(4) 4.3(4) 489,254(6) 418,868(6) 7.6(6)

Fiscal year ended February 1, 1992
Bank borrowings(5) . . . . . . . . . . . . . 37,000 8.0 130,000 36,876 9.1
Receivables Securitization Facility(6) . . . 489,254 7.4 633,798 466,006 8.9

<FN>
- - -------------------------
(1) The maximum amount outstanding during the period is determined on the basis
of the amounts outstanding at any month end.

(2) The average amount outstanding during the period and the weighted average
interest rate during the period are computed on the basis of daily
balances.

(3) Represents borrowings under the Company's postemergence Credit Facility.

(4) Represents borrowings under the Company's postemergence receivables
securitization facility provided by General Electric Capital Corporation.
The three year, $575.0 million facility provides for Blue Hawk Funding
Corporation, a limited purpose corporation not affiliated with the Company,
to acquire interests in the Company's credit card receivables and pay for
these interests through the issuance of commercial paper. Borrowings under
this facility are classified as long-term debt for financial statement
presentation purposes.

(5) Represents borrowings under the Company's postpetition Working Capital
Facility.

(6) Represents borrowings under the Company's postpetition Interim Receivables
Facility through July 1991 and the Receivables Securitization Facility
thereafter. The Receivables Securitization Facility provided for Camelback
Funding Corp., a limited-purpose corporation, wholly owned by the Company,
to issue concurrently $200.0 million in privately-placed 8.75% credit card
backed notes and up to $363.5 million in commercial paper. Borrowings
under these facilities were classified as long-term debt for financial
statement presentation purposes.

CARTER HAWLEY HALE STORES, INC.

SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION

ADVERTISING
(In thousands) COSTS(1)
- - ---------------------------------------------------------------------------

1993 (52 weeks) $ 71,748
1992 (17 Weeks) 31,631
1992 (35 Weeks) 47,911
1991 (52 weeks) 72,902

<FN>
- - -------------------------
(1) Advertising costs charged to expense in the fiscal period indicated.

QUARTERLY INFORMATION (unaudited)

Period Ended
-------------------------------------------------------------
May 1, July 31, October 30, January 29, January 29,
1993 1993 1993 1994 1994
(Dollar amounts in millions) (13 weeks) (13 weeks) (13 weeks) (13 weeks) (52 weeks)
- - ----------------------------------------------------------------------------------------------------------

1993
Sales. . . . . . . . . . . . . . . . . . . . $ 442.5 $ 474.9 $ 469.7 $ 705.6 $2,092.7

Percent change from prior year(1)
Total sales basis. . . . . . . . . . . . 2.0 (1.3) (4.2) (3.7) (2.1)
Comparative store sales basis. . . . . . 5.2 1.3 (.8) 1.3 1.6

Finance charge revenue . . . . . . . . . . . 21.2 19.9 18.9 21.5 81.5

Cost of goods sold, including occupancy
and buying costs . . . . . . . . . . . . . 329.5 360.3 360.0 539.3 1,589.1

Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . 129.2 130.3 133.9 157.8 551.1

Charge for non-recurring costs(1). . . . . . 25.0 20.0 45.0

Interest expense, net. . . . . . . . . . . . 22.3 21.7 19.8 21.1 84.9
-------- -------- -------- -------- --------
Earnings (loss) from operations before
income taxes . . . . . . . . . . . . . . . (17.3) (42.5) (25.1) (11.1) (95.9)

Income tax benefit (expense)(2). . . . . . . 6.9 (6.9)
-------- -------- -------- -------- --------

Net loss . . . . . . . . . . . . . . . . . . $ (10.4) $ (42.5) $ (25.1) $ (18.0) $ (95.9)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------

Net loss per common share. . . . . . . . . . $ (.29) $ (1.12) $ (.54) $ (.38) $ (2.30)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------

<FN>
(1) Non-recurring costs include $25.0 million in the second quarter and $5.0
million in the fourth quarter for one-time costs to be incurred in the
implementation of the strategic plan to streamline the Company. The fourth
quarter also includes a charge of $15.0 million to cover January 1994
earthquake related losses in excess of insurance proceeds.

(2) For fiscal 1993, the Company recorded a zero net tax benefit comprised of a
federal deferred tax benefit of $2.6 million offset by a state deferred tax
provision of $2.6 million. The federal tax benefit was limited to the $2.6
million beginning of the year federal deferred tax liability. The state
tax provision resulted from a California tax law change enacted in late
1993 which reduced the carryover period for California that operating loss
carryforwards from fifteen years to five years. These adjustments were
reflected in the fourth quarter of the year, resulting in the elimination
of the first quarter benefit which was established on the basis of a 40%
statutory rate applied to pretax results.

QUARTERLY INFORMATION (unaudited)

Period Ended(1)
---------------------------------------------------------------------------------------
May 2, August 1, October 3, October 3, October 31, January 30, January 30,
1992 1992 1992 1992 1992 1993 1993
(Dollar amounts in millions) (13 weeks) (13 weeks) (9 weeks) (35 weeks) (4 weeks) (13 weeks) (17 weeks)
- - ------------------------------------------------------------------------------------------------------------------------------------

1992
Sales. . . . . . . . . . . . . . . . . . . . $ 433.6 $ 481.4 $ 333.0 $ 1,248.0 $ 157.3 $ 732.5 $ 889.8

Percent change from prior year
Total sales basis. . . . . . . . . . . . .8 (2.9) (2.7) (1.6) (5.4) 5.7 3.5
Comparative store sales basis. . . . . . 1.4 (2.2) (1.9) (0.9) (4.8) 5.5 3.5

Finance charge revenue . . . . . . . . . . . 22.6 20.0 12.8 55.4 6.5 20.8 27.3

Cost of goods sold, including occupancy and
buying costs . . . . . . . . . . . . . . . 319.8 357.2 269.6 946.6 119.0 522.4 641.4

Selling, general, and administrative
expenses . . . . . . . . . . . . . . . . . 130.8 131.9 92.1 354.8 42.8 164.0 206.8

Interest expense, net. . . . . . . . . . . . 22.4 22.5 15.3 60.2 7.1 22.5 29.6
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from operations before
reorganization items and taxes . . . . . . (16.8) (10.2) (31.2) (58.2) (5.1) 44.4 39.3

Reorganization income (costs)(2) . . . . . . (3.6) (4.4) 892.1 884.1

Income tax benefit (expense)(3). . . . . . . 6.8 6.8 (16.6) (16.6)
--------- --------- --------- --------- --------- --------- ---------

Earnings (loss) from operations. . . . . . . (20.4) (14.6) 867.7 832.7 (5.1) 27.8 22.7

Extraordinary gain(4). . . . . . . . . . . . 304.4 304.4

Change in accounting(5). . . . . . . . . . . 18.8 18.8
--------- --------- --------- --------- --------- --------- ---------

Net earnings (loss). . . . . . . . . . . . . $ (1.6) $ (14.6) $ 1,172.1 $ 1,155.9 $ (5.1) $ 27.8 $ 22.7
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------

Earnings (loss) per common share(6). . . . . $ (.15) $ .79 $ .65
---------- --------- ---------
---------- --------- ---------

<FN>
(1) The financial statements prepared as of October 3, 1992, reflect the impact
of the Company's reorganization and were prepared utilizing the principles
of fresh start reporting in accordance with the Reorganization Statement.
The application of fresh-start reporting significantly affected the
comparability of certain pre- and post-reorganization period income and
expense elements.

(2) Reorganization income (costs) include professional fees and other
expenditures directly related to the Filing which were incurred during the
35 week period ended October 3, 1992, and as of the Effective Date, the
recognition of a $8.5 million provision for settlement of disputed claims
and a $906.4 million adjustment to fair value to reflect the valuation of
assets and liabilities in accordance with the Reorganization Statement.

(3) The income tax benefit of $6.8 million recognized in the 9 week period
ended October 3, 1992 reflects the reversal of existing tax reserves on a
favorable resolution of income tax audits for tax years through July 1990.
The tax provision of $16.6 million for the post-reorganization period
reflects state and federal taxes at statutory rates on pre-tax earnings for
that period.

(4) The extraordinary gain of $304.4 million reflects the gain on debt
discharge recognized at the Emergence Date.

(5) The change in accounting of $18.8 million reflects the adoption, as of the
Effective Date, of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes." The results for the first quarter were
restated to reflect the cumulative effect of the change.

(6) Per share data for periods prior to October 3, 1992 have been omitted as
these amounts do not reflect the current capital structure.

CARTER HAWLEY HALE STORES, INC.

INDEX TO EXHIBITS

EXHIBIT
NO. DESCRIPTION
- - ------- -----------

3.1 Amended and Restated Certificate of Incorporation of the Company;
incorporated by reference to Exhibit 4.2 to the Form S-8 filed
February 17, 1993.

3.2 Bylaws of the Company; incorporated by reference to Exhibit 3.2 to
the Form 10-K for the year ended January 30, 1993.

4.1 Form of Warrant Agreement; incorporated by reference to Exhibit 4.1
to the Form 10-K for the year ended January 30, 1993.

4.2 Form of Certificate of Designation, Preferences and Rights of
Series A Exchangeable Preferred Stock of the Company; incorporated
by reference to Exhibit 4.3 to the Form S-8 dated February 17,
1993.

4.3 Loan Agreement dated as of August 27, 1987, among The Prudential
Insurance Company of America, Carter Hawley Hale Stores, Inc. and
Thalhimer Brothers, Inc. with respect to $350,000,000; incorporated
by reference to Exhibit 4.5 to the Form 10-K for the twenty-six
weeks ended August 1, 1987.

4.4 Amendment to Loan Agreement and Notes dated as of June 30, 1988
among Carter Hawley Hale Stores, Inc., Thalhimer Brothers, Inc.,
and The Prudential Insurance Company of America; incorporated by
reference to Exhibit 4.4 to the Form 10-K for the year ended
February 1, 1992.

4.5 Amendment to Loan Agreement, Notes and License Agreement dated as
of August 3, 1990 among Carter Hawley Hale Stores, Inc., Thalhimer
Brothers, Inc., and The Prudential Insurance Company of America;
incorporated by reference to Exhibit 4.5 to the Form 10-K for the
year ended February 1, 1992.

4.6 Agreement and Release dated as of December 14, 1990 among Carter
Hawley Hale Stores, Inc., Thalhimer Brothers, Inc., and the
Prudential Insurance Company of America; incorporated by reference
to Exhibit 4.6 to the Form 10-K for the year ended February 1,
1992.

4.7 Settlement Agreement dated as of December 31, 1991, among Carter
Hawley Hale Stores, Inc., The Prudential Insurance Company of
America, Zell/Chilmark Fund, L.P., and Z/C Subsidiary Corporation;
incorporated by reference to Exhibit 4.7 to the Form 10-K for the
year ended January 30, 1993.

4.8 Loan Modification Implementation Agreement and Amendment to Loan
Agreements, License Agreement and Other Loan Documentation by and
between Carter Hawley Hale Stores, Inc. and The Prudential
Insurance Company of America dated as of October 8, 1992;
incorporated by reference to Exhibit 4.17 to the Form 10-K/A No.1
for the year ended January 30, 1993.

4.9 Amended and Restated Secured Promissory Note of Carter Hawley Hale
Stores, Inc. in favor of The Prudential Insurance Company of
America in the amount of $7,395,000.00 dated as of October 8, 1992;
incorporated by reference to Exhibit 4.18 to the Form 10-K/A No.1
for the year ended January 30, 1993.

EXHIBIT
NO. DESCRIPTION
- - ------- -----------

4.10 Amended and Restated Secured Promissory Note I of Carter Hawley
Hale Stores, Inc. in favor of The Prudential Insurance Company of
America in the amount of $157,638,000.00 dated as of October 8,
1992; incorporated by reference to Exhibit 4.19 to the Form 10-K/A
No.1 for the year ended January 30, 1993.

4.11 Amended and Restated Secured Promissory Note II of Carter Hawley
Hale Stores, Inc. in favor of The Prudential Insurance Company of
America in the amount of $19,875,000.00 dated as of October 8,
1992; incorporated by reference to Exhibit 4.20 to the Form 10-K/A
No.1 for the year ended January 30, 1993.

4.12 Amended and Restated Secured Promissory Note of Carter Hawley Hale
Stores, Inc. in favor of the Prudential Insurance company of
America in the amount of $159,092,000.00; incorporated by reference
to Exhibit 4.21 to the Form 10-K/A No.1 for the year ended January
30, 1993.

4.13 Accrued Interest Note of Carter Hawley Hale Stores, Inc. in favor
of The Prudential Insurance Company of America in the amount of
$53,350,000.00 (subjected to increase) dated as of October 8, 1992;
incorporated by reference to Exhibit 4.22 to the Form 10-K/A No.1
for the year ended January 30, 1993.

4.14 Term Loan Agreement dated as of June 28, 1988, among Carter Hawley
Hale Stores, Inc., Thalhimer Brothers, Inc., the Banks Party
thereto, and Bank of America, as agent, with respect to
$135,000,000; incorporated by reference to Exhibit 4.8 to the
Form 10-K for the year ended July 30, 1988.

4.15 Modification Agreement dated as of November 28, 1988 among Bank of
America National Trust and Savings Association as Bank and Agent,
Barclays Bank PLC, Security Pacific National Bank, Carter Hawley
Hale Stores, Inc., and Thalhimer Brothers, Inc.; incorporated by
reference to Exhibit 4.8 to the Form 10-K for the year ended
February 1, 1992.

4.16 First Amendment to Term Loan Agreement dated as of December 30,
1988 among Bank of America National Trust and Savings Association
as Bank and Agent, Barclays Bank PLC, Security Pacific National
Bank, Carter Hawley Hale Stores, Inc., and Thalhimer
Brothers, Inc.; incorporated by reference to Exhibit 4.9 to the
Form 10-K for the year ended February 1, 1992.

4.17 Second Amendment to Term Loan Agreement and Waiver dated as of May
31, 1989 among Bank of America National Trust and Savings
Association as Bank and Agent, Barclays Bank PLC, Security Pacific
National Bank, Carter Hawley Hale Stores, Inc., and Thalhimer
Brothers, Inc.; incorporated by reference to Exhibit 4.10 to the
Form 10-K for the year ended February 1, 1992.

4.18 Third Amendment to Term Loan Agreement dated as of July 26, 1989,
among Bank of America National Trust and Savings Association as
Bank and Agent, Barclays Bank PLC, Security Pacific National Bank,
Carter Hawley Hale Stores, Inc., and Thalhimer Brothers, Inc.;
incorporated by reference to Exhibit 4.11 to the Form 10-K for the
year ended February 1, 1992.

4.19 Fourth Amendment to Term Loan Agreement dated as of September 22,
1989 among Bank of America National Trust and Savings Association
as Bank and Agent, Barclays Bank PLC, Security Pacific National
Bank, Carter Hawley Hale Stores, Inc., and Thalhimer
Brothers, Inc.; incorporated by reference to Exhibit 4.12 to the
Form 10-K for the year ended February 1, 1992.

EXHIBIT
NO. DESCRIPTION
- - ------- -----------

4.20 Agreement and Release dated as of December 12, 1990 by and among
Bank of America National Trust and Savings Association as Bank and
Agent, Barclays Bank PLC, Security Pacific National Bank, Carter
Hawley Hale Stores, Inc., and Thalhimer Brothers, Inc.;
incorporated by reference to Exhibit 4.13 to the Form 10-K for the
year ended February 1, 1992.

4.21 Settlement Agreement dated as of July 28, 1991 between Carter
Hawley Hale Stores, Inc. and Bank of America National Trust and
Savings Association; incorporated by reference to Exhibit 4.15 to
the Form 10-K for the year ended January 30, 1993.

4.22 Amended and Restated Term Loan Agreement by and among the Banks
party thereto, Bank of America National Trust and Savings
Association as agent for Banks and Carter Hawley Hale Stores, Inc.,
dated as of October 8, 1992; incorporated by reference to Exhibit
4.23 to the Form 10-K/A No.1 for the year ended January 30, 1993.

4.23 Master Capitalized Interest Note in favor of Bank of America
National Trust and Savings Association as agent for certain banks
in the amount of $10,750,830.46 dated as of October 8, 1992;
incorporated by reference to Exhibit 4.24 to the Form 10-K/A No.1
for the year ended January 30, 1993.

4.24 Master Principal Note in favor of Bank of America National Trust
and Savings Association as agent for certain banks in the amount of
$89,662,700.00 dated as of October 8, 1992; incorporated by
reference to Exhibit 4.25 to the Form 10-K/A No.1 for the year
ended January 30, 1993.

4.25 Stockholder's Agreement between Carter Hawley Hale Stores, Inc. and
First Plaza Group Trust, by its Trustee Mellon Bank, N.A., dated as
of January 25, 1993; incorporated by reference to Exhibit 4.16 to
the Form 10-K for the year ended January 30, 1993.

4.26 Waiver Agreement, dated as of May 13, 1993 by and between Carter
Hawley Hale Stores, Inc. and First Plaza Group Trust, by its
trustee Mellon Bank, N.A.; incorporated by reference to Exhibit
28.2 to Form S-3 filed May 14, 1993.

4.27 Waiver Agreement, dated as of December 8, 1993 by and between
Carter Hawley Hale Stores, Inc. and First Plaza Group Trust, by its
trustee Mellon Bank, N.A.; incorporated by reference to Exhibit
28.1 to Form S-3 filed December 8, 1993.

4.28 Receivables-Backed Credit Agreement among CHH Receivables, Inc.,
Blue Hawk Funding Corporation and General Electric Capital
Corporation, as Agent; incorporated by reference to Exhibit 10.1 to
the Form 10-K for the year ended January 30, 1993.

4.29 Assignment and Security Agreement among CHH Receivables, Inc., Blue
Hawk Funding Corporation, Cash Collateral Bank and General Electric
Corporation, as Agent, Letter of Credit Agent, Liquidity Agent and
Collateral Agent; incorporated by reference to Exhibit 10.2 to the
Form 10-K for the year ended January 30, 1993.

4.30 Receivables Purchase Agreement among Carter Hawley Hale Stores,
Inc. and CHH Receivables, Inc.; incorporated by reference to
Exhibit 10.3 to the Form 10-K for the year ended January 30, 1993.

4.31 Promissory Note made by CHH Receivables, Inc. in favor of Blue Hawk
Funding Corporation; incorporated by reference to Exhibit 10.4 to
the Form 10-K for the year ended January 30, 1993.

EXHIBIT
NO. DESCRIPTION
- - ------- -----------

4.32 Letter of Credit Reimbrusement Agreement among CHH Receivables,
Inc., Blue Hawk Funding Corporation, and General Electric Capital
Corporation, as Letter of Credit Agent; incorporated by reference
to Exhibit 10.5 to the Form 10-K for the year ended January 30,
1993.

4.33 Subordinated Retailer Security Agreement made by Carter Hawley Hale
Stores, Inc. in favor of CHH Receivables, Inc.; incorporated by
reference to Exhibit 10.6 to the Form 10-K for the year ended
January 30, 1993.

4.34 Credit Agreement, dated as of October 8, 1992, among Carter Hawley
Hale Stores, Inc., Certain Commercial Lending Institutions, and
General Electric Capital Corporation, as the Agent for the Lenders;
incorporated by reference to Exhibit 10.9 to the Form 10-K for the
year ended January 30, 1993.

4.35 Form of Revolving Credit Note; incorporated by reference to
Exhibit 10.10 to the Form 10-K for the year ended January 30, 1993.

4.36 Pledge and Security Agreement made by Carter Hawley Hale Stores,
Inc. in favor of General Electric Capital Corporation; incorporated
by reference to Exhibit 10.11 to the Form 10-K for the year ended
January 30, 1993.

4.37 Trademark Security Agreement made by Carter Hawley Hale Stores,
Inc. in favor of General Electric Capital Corporation; incorporated
by reference to Exhibit 10.12 to the Form 10-K for the year ended
January 30, 1993.

4.38 Letter agreement dated as of April 29, 1993, by and between General
Electric Capital Corporation, as agent and as a lender, and Carter
Hawley Hale Stores, Inc.; incorporated by reference to Exhibit 4.1
to the Form 10-Q for the period ended May 1, 1993.

4.39 Second Amendment to Credit Agreement, dated as of May 14, 1993,
among Carter Hawley Hale Stores, Inc., various financial
institutions and General Electric Capital Corporation, as agent for
the lenders; incorporated by reference to Exhibit 4.2 to the Form
10-Q for the period ended May 1, 1993.

4.40 Amended and Restated Second Amendment to Credit Agreement, dated as
of August 20, 1993, among Carter Hawley Hale Stores, Inc., various
financial institutions and General Electric Capital Corporation, as
agent for the lenders; incorporated by reference to Exhibit 4.1 to
the Form 10-Q for the period ended July 31, 1993.

4.41 Third Amendment to Credit Agreement, dated as of September 30,
1993, among Carter Hawley Hale Stores, Inc., various financial
institutions and General Electric Capital Corporation, as agent for
the lenders; incorporated by reference to the Form 8-K dated
October 25, 1993.

4.42 Fourth Amendment to Credit Agreement, dated as of October 31, 1993,
among Carter Hawley Hale Stores, Inc., various financial
institutions and General Electric Capital Corporation, as agent for
the lenders; incorporated by reference to the Form 8-K dated
November 8, 1993.

4.43 Fifth Amendment to Credit Agreement, dated as of December 10, 1993,
among Carter Hawley Hale Stores, Inc., various financial
institutions and General Electric Capital Corporation, as agent for
the lenders; incorporated by reference to the Form 8-K dated
December 21, 1993.

EXHIBIT
NO. DESCRIPTION
- - ------- -----------

4.44 Sixth Amendment to Credit Agreement, dated as of February 26, 1994,
among Carter Hawley Hale Stores, Inc., various financial
institutions and General Electric Capital Corporation, as agent for
the lenders; incorporated by reference to the Form 8-K dated March
9, 1994.

4.45 Indenture dated as of December 21, 1993, between Carter Hawley Hale
Stores, Inc. and Continental Bank, National Association, as
Trustee, relating to Carter Hawley Hale Stores, Inc.'s 61/4%
Convertible Senior Subordinated Notes due 2000, incorporated by
reference to Exhibit 4.1 to Form S-3 filed January 7, 1994.

4.46 Form of Convertible Senior Subordinated Notes (included in Exhibit
4.1 to the Registration Statement on Form S-3 filed on January 7,
1994), incorporated by reference to Exhibit 4.2 to the Form S-3
filed January 7, 1994.

4.47 Registration Agreement, dated December 21, 1993, between Carter
Hawley Hale Stores, Inc. and Salomon Brothers Inc., incorporated by
reference to Exhibit 4.3 to Form S-3 filed January 7, 1994.

The Company has outstanding certain other long-term indebtedness.
Such long-term indebtedness does not exceed 10% of the total assets
of the Company and its subsidiaries; therefore, copies of
instruments defining the rights of holders of such indebtedness are
not included as exhibits. The Company agrees to furnish copies of
such instruments to the Securities and Exchange Commission upon
request.

COMPENSATION ARRANGEMENTS

10.1 Deferred Compensation Plan of Carter Hawley Hale Stores, Inc. dated
as of June 3, 1976 and amended as of February 4, 1977; incorporated
by reference to Exhibit 15 to the Form 10-K for the fiscal year
ended January 29, 1977.

10.2 Amendment to the Deferred Compensation Plan of Carter Hawley Hale
Stores, Inc. executed on February 6, 1980; incorporated by
reference to Exhibit 20 to the Form 10-K for the fiscal year ended
February 2, 1980.

10.3 Amendment to the Deferred Compensation Plan of Carter Hawley Hale
Stores, Inc. executed on April 7, 1983; incorporated by reference
to Exhibit 10.13 to the Form 10-K for fiscal year ended
January 29, 1983.

10.4 Amendment 1990-I to the Deferred Compensation Plan of Carter Hawley
Hale Stores, Inc. effective as of August 1, 1990, incorporated by
reference to Exhibit 4.6 to Post-Effective Amendment No. 7 to the
Registration Statement (No. 2-6810) of Carter Hawley Hale Stores,
Inc. filed November 7, 1990.

10.5 Amendment to the Deferred Compensation Plan of Carter Hawley Hale
Stores, Inc.; incorporated by reference to Exhibit 4.5 to
Post-Effective Amendment No. 5 to the Registration Statement
(No. 2-68102) of Carter Hawley Hale Stores, Inc. filed
July 31, 1987.

10.6 Carter Hawley Hale Savings & Investment Plan, as amended and
restated as of March 1, 1993; incorporated by reference to Exhibit
4.1 to the Registration Statement (No. 33-58478) of Carter Hawley
Hale Stores, Inc. filed February 17, 1993.

10.7 Carter Hawley Hale Stores, Inc. 1992 Stock Incentive Plan, as
amended; incorporated by reference to Exhibit 10.19 to the Form 10-
K for the year ended January 30, 1993.

EXHIBIT
NO. DESCRIPTION
- - ------- -----------

10.8 Carter Hawley Hale Stores, Inc. Executive Retention Incentive Plan
effective as of February 1, 1991; incorporated by reference to
Exhibit 10.15 of the Form 10-K for the year ended February 1, 1992.

10.9 Carter Hawley Hale Store, Inc. Special Severance Pay Plan effective
as of February 1, 1991; incorporated by reference to Exhibit 10.16
of the Form 10-K for the year ended February 1, 1992.

10.10 Carter Hawley Hale Stores, Inc. Retirement Plan for Non-employee
Directors dated as of February 1, 1989; incorporated by reference
to Exhibit 10.17 of the Form 10-K for the year ended February 1,
1992.

10.11 Carter Hawley Hale Stores, Inc. Directors Deferred Compensation
Plan effective as of February 1, 1986; incorporated by reference to
Exhibit 10.18 of the form 10-K for the year ended February 1, 1992.

10.12 Carter Hawley Hale Stores, Inc. Management Deferred Compensation
Plan; incorporated by reference to Exhibit 10.19 to the
Registration Statement (No. 33-16115) of Carter Hawley Hale Stores,
Inc. filed July 28, 1987.

10.13 Carter Hawley Hale Stores, Inc. Deferred Compensation Plan for
Executives; incorporated by reference to Exhibit 10.20 to the
Registration Statement (No. 33-16115) of Carter Hawley Hale Stores,
Inc. filed July 28, 1987.

10.14 Pension Plan for Employees of Carter Hawley Hale Stores, Inc.;
incorporated by reference to Exhibit 10.14 to the Form 10-K/A No. 1
for the year ended January 30, 1993.

10.15 Carter Hawley Hale Stores, Inc. Supplemental Executive Retirement
Plan; incorporated by reference to Exhibit 10.14 to the Form 10-K
for the fiscal year ended January 28, 1984.

10.16 Amendment No. 4 to Supplemental Executive Retirement Plan of Carter
Hawley Hale Stores, Inc. dated January 7, 1991; incorporated by
reference to Exhibit 10.17 to Form 10-K/A No. 1 for the year ended
January 30, 1993.

10.17 Form of employment agreement between Carter Hawley Hale Stores,
Inc. and certain officers; incorporated by reference to Exhibit
10.17 to the Form 10-K for the year ended January 30, 1993.

10.18* Listing of officers covered as of January 29, 1994 by form of
employment agreement referenced at Exhibit 10.17.

10.19* Employment agreement between Carter Hawley Hale Stores, Inc. and
Mr. David L. Dworkin dated March 24, 1993.

10.20* Loan agreement between Carter Hawley Hale Stores, Inc. and Mr.
Robert J. Lambert dated January 3, 1994.

10.21 Assumption and amendment to employment agreement between Carter
Hawley Hale Stores, Inc. and Philip M. Hawley, dated August 14,
1992; incorporated by reference to Exhibit 10.30 to Form 10-K for
the year ended January 30, 1993.

10.22 Agreement between Carter Hawley Hale Stores, Inc. and Philip M.
Hawley, dated October 12, 1992; incorporated by reference to
Exhibit 10.31 to Form 10-K for the year ended January 30, 1993.

EXHIBIT
NO. DESCRIPTION
- - ------- -----------

10.23 Agreement between Carter Hawley Hale Stores, Inc. and Philip M.
Hawley, dated December 30, 1992; incorporated by reference to
Exhibit 10.32 to the Form 10-K for the year ended January 30, 1993.

10.24 Form of indemnification agreement between Carter Hawley Hale
Stores, Inc. and each of its directors; incorporated by reference
to Annex XV to the Registration Statement (No. 33-16115) of Carter
Hawley Hale Stores, Inc. filed July 28, 1987.

10.25 Form of indemnification agreement between Carter Hawley Hale
Stores, Inc. and certain of its officers; incorporated by reference
to Exhibit 10.31 to the Registration Statement (No. 33-16115) of
Carter Hawley Hale Stores, Inc. filed July 28, 1987.

10.26 Employee Benefits Agreement dated as of July 24, 1987 between
Carter Hawley Hale Stores, Inc. and The Neiman Marcus Group, Inc.;
incorporated by reference to Exhibit 3 to the Form 8-K dated
August 20, 1987.

10.27 Postpetition Store Modernization Facility Conversion Agreement
dated as of August 18, 1992 between Carter Hawley Hale Stores, Inc.
and Zell/Chilmark Fund, L.P.; incorporated by reference to Exhibit
10.7 to the Form 10-K for the year ended January 30, 1993.

10.28 Agreement by and among Carter Hawley Hale Stores, Inc., the Neiman
Marcus Group, Inc. and General Cinema Corporation, dated July 7,
1992; incorporated by reference to Exhibit 10.8 to the Form 10-K
for the year ended January 30, 1993.

11. Computation of Earnings per Share included on page 73.

22. Carter Hawley Hale Stores, Inc. Subsidiaries included on page 74.

24. Consent of Price Waterhouse included on page 37.

25.* Powers of Attorney.

* Exhibit filed with this Form 10-K.

Copies of any of the foregoing exhibits may be obtained by making a
written request to the Secretary of the Company at the address shown on the
cover. Copies will be furnished at a price of $.20 per page with a minimum
charge of $10 per exhibit.

CARTER HAWLEY HALE STORES, INC. EXHIBIT 11

COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)

Seventeen Weeks
Year Ended Ended
January 29, 1994 January 30, 1993
---------------- ----------------

Net earnings (loss) used to
compute earnings (loss)
per common share $ (95,920) $ 22,720
============ ==========

Weighted average number of common
shares outstanding during this period(1) 41,671 35,087
============ =========

Earnings (loss) per common share(2) $ (2.30) $ .65
============ =========

<FN>
(1) The weighted average number of shares outstanding reflects all shares of
Common Stock expected to be issued in accordance with the POR as if they had
been issued on the Emergence Date.

(2) Per share data for period prior to the Emergence Date have been omitted
as these amounts do not reflect the current capital structure.

EXHIBIT 22

CARTER HAWLEY HALE STORES, INC.

SUBSIDIARIES AS OF JANUARY 29, 1994

Percentage State
of of
Ownership Incorporation
--------- --------------

ACTIVE:

CHH Receivables, Inc. 100% Delaware

INACTIVE:

Carter Hawley Hale Credit Corp. 100% Nevada

Camelback Funding Corp. 100% Delaware

Carter Hawley Hale Properties, Inc. 100% California

Private Business Air Service, Inc. 100% California