SPIEGEL INC, 10-K, 1994-03-30

SPIEGEL INC
10-K, 1994-03-30
CATALOG & MAIL-ORDER HOUSES

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CONFORMED COPY

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended ....................December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from ..................... to ......................
Commission file number .......................0-16126

S P I E G E L, I N C.
(Exact name of registrant as specified in its charter)

DELAWARE 36-2593917
(State of Incorporation) (I.R.S. Employer Identification No.)

3500 LACEY ROAD 60515-5432
DOWNERS GROVE, ILLINOIS (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code (708) 986-8800

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Class A Non-Voting Common Stock,
Par Value, $1.00 Per Share
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES __X__ NO _____

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. [ X ]

The Class B Voting Common Stock is not publicly traded. Therefore, no market
value information is readily available on this class of stock.

The number of the shares of Registrant's Class A Non-Voting Common Stock and
Class B Voting Common Stock outstanding on March 18, 1994 was 15,046,804 and
93,141,654, respectively.

DOCUMENTS INCORPORATED BY REFERENCE: None

The exhibit index is located on pages 44-45.

<PAGE>

PART I

ITEM 1. BUSINESS

A. GENERAL DEVELOPMENT OF BUSINESS

Spiegel, Inc., a Delaware corporation, was incorporated in 1965. Spiegel, Inc.
and its subsidiaries are sometimes referred to collectively in this Report on
Form 10-K as the "Company." The Spiegel, Inc. catalog operations and related
retail store operations are collectively referred to in this Report on Form 10-K
as "Spiegel." The Company and its predecessors date from 1865. Since 1905, the
Company has operated as a catalog merchandiser. In 1982, the Company was
purchased by Otto Versand (GmbH & Co) ("Otto Versand"), a privately-held German
partnership that is one of the largest catalog merchandisers in the world,
selling its products in Europe and Japan. In 1984, all of the capital stock of
the Company was transferred to the partners of Otto Versand or their designees.
In this transaction, 65% of the capital stock of the Company was transferred to
Spiegel Holdings, Ltd., an Illinois limited partnership, whose general partner
was Dr. Werner Otto. Since 1984, additional shares of the Company's capital
stock have been acquired by Spiegel Holdings, Ltd. and its successor. In 1986,
Spiegel Holdings, Ltd. was converted to Spiegel Holdings, Inc., a Delaware
corporation ("SHI"). Prior to the Company's 1987 initial public offering of
Class A non-voting common stock, all of Spiegel's existing capital stock was
converted into Class B voting common stock. SHI holds 97.5% of the Company's
Class B voting common stock, affording SHI control of the Company.

In 1988, the Company acquired Eddie Bauer, Inc. and certain related Canadian
assets (collectively, "Eddie Bauer"). Eddie Bauer is a leading specialty
retailer serving the casual lifestyle needs of men and women through the sale of
high quality apparel, home furnishings and accessories through catalogs and
specialty retail stores.

In 1990, the Company acquired First Consumers National Bank ("FCNB"). FCNB is a
special purpose bank limited to the issuance of credit cards, primarily FCNB
Preferred Charge cards for use by Spiegel, Eddie Bauer and New Hampton
customers.

In August 1993, the Company acquired substantially all of the assets of New
Hampton, Inc. ("New Hampton") through a bankruptcy proceeding. New Hampton is
a specialty catalog company offering fashionable women's apparel at moderate
price points.

In September 1993, the Company entered into an arrangement with Otto-Sumisho,
Inc. to sell Eddie Bauer products through Eddie Bauer retail stores and
catalogs in Japan. In addition, the Company announced its intention to enter
into a new channel of retail distribution, television home shopping, through a
joint venture with Time Warner Entertainment Company, L.P. ("Time Warner") to
develop catalog home shopping channels.

<PAGE>

B. NARRATIVE DESCRIPTION OF BUSINESS

Principal products, services, and revenue sources. The Company has three
principal merchandise categories: apparel, household furnishings and other
merchandise. The components of net sales by merchandise category for the last
three years were:

1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Wearing apparel 69% 68% 67%
Household furnishings 20 21 22
Other merchandise 11 11 11
------ ------ ------
100% 100% 100%
====== ====== ======
</TABLE>

The Company's household furnishings range from traditional to contemporary
styles, including accent pieces, decorative accessories, bedding and bath, home
electronics, window treatments and rugs. The other merchandise category
includes items such as fitness and personal care equipment, toys, cameras and
luggage.

PRODUCT DEVELOPMENT AND SOURCING

The Company's product development and sourcing teams have become an increasingly
significant element of its private label merchandise strategy. The Company
selects manufacturers based on their ability to produce high quality product on
a cost-effective basis. The Company's product design teams select and source
fabrics to be delivered to manufacturers along with product patterns,
specifications and templates used for cutting fabric and other pre-production
work. Prototype samples are submitted to the Company for final production
approval to ensure manufacturer compliance with specifications.

The Company does not have any manufacturing facilities; all production is done
by third-party contractors. The product development and sourcing teams also
closely monitor the timeliness of manufacturers' delivery to the Company's
distribution facilities and provide them with packaging information. The
Company believes this strategy permits maximum flexibility, enhanced inventory
management and consistent quality control without the risks associated with
operating its own manufacturing facilities.

COMMON SYSTEMS STRATEGY

By capitalizing on synergies between Spiegel and Eddie Bauer, the Company
continues to make significant progress toward its long-term goal of operating
common catalog systems for the two businesses. After implementing a common
order-entry system for Spiegel and Eddie Bauer in 1990, the Company completed
installation of a common customer-satisfaction system during the summer of 1992.
These systems ensure rapid response to customer orders and inquiries and allow
Spiegel and Eddie Bauer operators to handle each other's calls when back-up
support is necessary. In addition, Eddie Bauer implemented a computerized
marketing system patterned after Spiegel's system for managing its customer data
base, which it believes will create marketing efficiencies and cost savings.

Another phase of the Company's common systems strategy is the planned catalog
distribution facility in Groveport, Ohio. The Company believes the new facility
will be among the largest and most technologically advanced catalog fulfillment
systems in the United States, providing improved productivity and customer
service. This facility will replace certain current catalog distribution
facilities for Spiegel and Eddie Bauer. Shipments of Eddie Bauer catalog
merchandise from the new facility are scheduled to begin in July 1994, with
Spiegel catalog shipments expected to follow in early 1995. The new facility is
designed to meet the Company's catalog distribution capacity needs for the
foreseeable future.

<PAGE>

The following is a discussion of the major operations of the Company: Spiegel,
Eddie Bauer, New Hampton and Credit.

SPIEGEL

Spiegel offers apparel, household furnishings and other merchandise through
its various catalogs and, to a lesser extent, Ultimate Outlet and For You
retail stores. Spiegel is one of the largest catalog companies in the
United States and in 1993 distributed over 225 million catalogs throughout
the country. At December 31, 1993, Spiegel's customer base included 6.0
million active customers (customers who have purchased within the last 18
months).

Spiegel's apparel merchandise, which represented 58% of its sales in 1993,
is primarily private label, developed by its product design teams based on
emerging fashion trends and customer research. In addition, Spiegel
features apparel by well-known American designers such as Liz Claiborne, CK
Calvin Klein and DKNY. Spiegel's household furnishings, which represented
38% of its sales in 1993, are a mixture of private label and branded
merchandise ranging from traditional to contemporary styles, including
accent pieces, decorative accessories, bedding and bath, home electronics,
window treatments and rugs.

Spiegel catalogs serve as a fashion resource for the busy working woman.
These catalogs include Spiegel's trademark 600-page semi-annual catalog,
specialty catalogs targeted to distinct market segments and other catalog
mailings throughout the year. The Company has used proprietary and other
data from within and outside its existing customer base and its fashion and
marketing expertise to identify an assortment of niche markets. Spiegel
addresses each of these markets with a targeted specialty merchandise
concept, through specialty catalogs and through "shops" included in
Spiegel's main semi-annual catalog. A shop is a focused merchandise
assortment targeted to a specific group of customers. One such shop from
the Spiegel catalog is Sarah Chapman, which features romantic, classic
clothing for customers who prefer traditional styles. Shops are managed by
entrepreneurial groups within the Spiegel catalog organization, each
comprised of representatives from different areas such as fashion,
merchandising, marketing, and advertising. Spiegel believes that this
specialty or niche marketing approach enables it to address the widely
varying needs of a diverse customer base.

EDDIE BAUER

Eddie Bauer is a leading specialty retailer serving the casual lifestyle
needs of men and women through the sale of high quality apparel, home
furnishings and accessories. Founded in 1920, Eddie Bauer operates 294
retail stores in addition to a large catalog operation. A key strategy for
Eddie Bauer is to leverage synergies between its retail and catalog
channels of distribution, maximizing opportunities for cross-promotion
between catalog and retail. This strategy includes utilizing the catalog
customer database to help identify potential store locations, using catalog
space to advertise the retail concept, and utilizing retail store mailing
lists to help build the catalog file. Eddie Bauer's principal retailing
concept is its trademark Eddie Bauer sportswear stores and catalogs, which
feature predominantly private label casual apparel and accessories. Eddie
Bauer also has other specialty retail concepts that serve targeted niches.
These specialty concepts include the Eddie Bauer Home, which offers home
furnishings through retail stores and a separate catalog; All Week Long,
which features women's sportswear, casual clothing and special occasion
attire through retail stores and a separate catalog; and the Eddie Bauer
Sport Shop, a store-within-a-store

<PAGE>

concept which provides premier apparel, equipment and accessories for field
and stream sports. In September 1993, Eddie Bauer entered into an
arrangement with Otto-Sumisho, Inc. to sell its full line of Eddie Bauer
sportswear products through retail stores and catalogs in Japan. Three
Eddie Bauer stores are expected to open in Japan in the Fall of 1994 along
with the introduction of the Japanese Eddie Bauer catalog. In addition to
its catalog and retail store businesses, Eddie Bauer has capitalized on
selected licensing opportunities. Eddie Bauer's most significant current
licensee is Ford Motor Company, which uses the Eddie Bauer name and logo on
special series Ford vehicles.

Eddie Bauer's private label merchandise is developed by its product design
teams and manufactured by third party manufacturers according to its
specifications. The Eddie Bauer product design teams work with the
Company's product development and sourcing department in developing
favorable sourcing alternatives.

Beginning in 1991 and continuing throughout 1992, Eddie Bauer implemented
several changes in its retail and catalog operations. One of the primary
changes was to implement a new merchandise strategy which narrowed and
focused the merchandise assortment into key items or "essential styles"
that were supported by a stronger inventory position. Eddie Bauer also
instituted an extensive store remodeling and refurbishment program to
update the visual appearance of its stores and improve its merchandise
presentation. In 1992 and 1993, Eddie Bauer remodelled 60 and 45 stores,
respectively, and refixtured several others. Eddie Bauer plans to remodel
approximately 50 more stores in 1994. These changes were instrumental in
achieving strong sales growth, a reduction of promotional pricing and Eddie
Bauer's improved performance in 1992 and 1993. In addition, Eddie Bauer
believes that increased usage of its Preferred Charge card has resulted in
larger average transaction sizes and greater frequency of purchases.

EDDIE BAUER RETAIL DIVISION.

Eddie Bauer operates 260 retail and 34 outlet stores in the United States
and Canada. Of these stores, 13 are Eddie Bauer Home Collection and seven
are All Week Long stores. A typical Eddie Bauer store is approximately
6,000 gross square feet and is located in an upscale regional mall or a
high traffic downtown location, because the Company believes that
convenience is a primary consideration for its target customers.
Eddie Bauer's catalog customer database serves as a valuable
tool in identifying potential store locations. Most of Eddie Bauer's
current stores are located in large metropolitan markets. Eddie Bauer has
also begun to explore opportunities in certain smaller markets where it
believes a concentration of its target customers exists. Eddie Bauer
believes that these markets have the potential to contribute store profit
margins comparable to the existing store base. Eddie Bauer outlet stores,
which offer overstock and end-of-season merchandise, are located
predominantly in outlet malls and strip centers and generally in areas not
served by its core specialty retail stores.

<PAGE>

Eddie Bauer opened 30 new stores in 1993. One store was closed in 1993.
Growth in this division has been due principally to the growth in
comparable store sales, which reached 17% in 1992 and 11% in 1993, and, to
a lesser extent, to new store openings. The Company believes that its
catalog and comparable store net sales increases during 1992 and 1993 were
primarily the result of changes made to the Company's merchandising
strategies initiated in 1991. The Company does not expect comparable store
sales growth to continue at 1992 and 1993 rates. Also, the Company
currently plans to increase the number of Eddie Bauer new store openings
from the 30 stores in 1993 to approximately 60 in each of the next two
years. The average cost of opening a typical new Eddie Bauer store in 1993,
including inventory, furniture and fixtures, pre-opening expenses and net
leasehold improvements, is approximately $800,000. Eddie Bauer's ability to
open and operate new stores profitably is dependent on the availability of
suitable store locations, the negotiation of acceptable lease terms, Eddie
Bauer's financial resources and its ability to control the operational
aspects and personnel requirements of its growth.

EDDIE BAUER CATALOG DIVISION.

In 1993, the Eddie Bauer catalog division distributed over 88 million
catalogs and had approximately 2.7 million active customers who had
purchased within the last 12 months. As a corollary to its retail
operations, Eddie Bauer catalog concepts include its trademark Eddie Bauer
catalog, Eddie Bauer Home Collection and All Week Long. Eddie Bauer
recently introduced its largest catalog yet, The Complete Resource,
combining all of its specialty retail store concepts in a single catalog.
Eddie Bauer also actively pursues new customers within its target market
through a variety of initiatives including national print advertising, list
rentals and utilizing names of its retail store customers.

NEW HAMPTON

New Hampton, acquired by the Company in August 1993, is a specialty catalog
company whose principal catalog, Newport News (formerly Avon Fashions)
offers fashionable, moderately priced women's apparel. Merchandise
categories currently include swimwear, dresses, casual wear, evening wear
and career wear. In addition, New Hampton has another smaller catalog,
James River Traders which markets value-oriented women's apparel. Newport
News represented approximately 87% of New Hampton's sales in 1993 and the
Company believes it will continue to represent a significant portion of New
Hampton's revenues in the future. In 1993, Newport News and James River
Traders mailed 161 million catalogs to active and prospective customers.
During 1993, 4.0 million customers purchased from the Newport News and
James River Traders catalogs. New Hampton's contribution to the Company's
consolidated net sales in 1993 was approximately $63 million.

<PAGE>

CREDIT

In an effort to build brand loyalty and to provide additional convenience
for its customers, the Company offers a credit program for qualifying
catalog and retail customers in the form of its Preferred Charge card,
which is imprinted with a Spiegel, Eddie Bauer or E STYLE logo depending on
the source of the original application for credit. This card allows a
customer to purchase products from both Spiegel and Eddie Bauer, regardless
of the imprint on the card. FCNB is the issuer of the Preferred Charge
card, and its activities are limited to the issuance of credit cards. In
February 1994, the Company introduced a proprietary credit card to
customers of its recently acquired New Hampton subsidiary. Preliminary
response to this offering has been very positive. Revenues generated by
the credit operations represented 8% of the Company's total revenues in
1993.

Approximately 47% of the Company's 1993 net sales were made on the
Preferred Charge card. In 1993, approximately 75% of Spiegel catalog net
sales and approximately 24% of Eddie Bauer's net sales were made using the
Preferred Charge card. The lower percentage of Eddie Bauer sales made on
the Preferred Charge card is attributable primarily to its relatively
recent availability to Eddie Bauer customers and to the relatively higher
percentage of retail store sales at Eddie Bauer. Catalog sales generally
have a higher percentage of sales made on credit than retail store sales.

FCNB solicits for new Preferred Charge card accounts with both preapproved
and non-preapproved applications. The accounts are serviced through the
Company's corporate data center located in Westmont, Illinois, with all
credit application analysis, strategy and policy formulation performed at
FCNB's Beaverton, Oregon headquarters. FCNB also issues MasterCard credit
cards, which represent approximately 5% of its outstanding cards.

MERCHANDISE.

The Company sells domestically produced and imported merchandise, which it
purchases in the open market from approximately 4,000 suppliers, none of which
supplied as much as 5% of the merchandise purchased during 1993. A significant
amount of the dollar value of merchandise purchased by the Company is imported
directly from the Far East and Europe. Consequently, the Company is subject to
the risks generally associated with conducting business abroad. The Company's
business could be affected by economic events or political instability that
might affect imports, including duties, quotas and work stoppages. To date
these factors have not caused any material disruption of the Company's
operations. As with other companies that denominate purchases in dollars,
declines in the dollar relative to foreign currencies could over time increase
the cost to the Company of merchandise purchased in foreign countries, which
could adversely affect the Company's results of operations. The Company is
unable to predict the effect, if any, of the above; however, the Company
believes this risk exists for many other retailers.

LICENSES AND TRADEMARKS.

The Company utilizes its own trademarks and tradenames including "Spiegel" and
"Eddie Bauer." The Company is also licensed to sell goods under the "Together!"
label. With the exception of the names "Spiegel," "Eddie Bauer" and
"Together!," the Company believes that loss or abandonment of any particular
trademark would have no significant effect on its business.

<PAGE>

SEASONALITY OF BUSINESS.

The Company, like other retailers, has experienced and expects to continue to
experience seasonal fluctuations in its merchandise sales and net income.
Historically, a disproportionate amount of the Company's net sales and a
majority of its net earnings have been realized during the fourth quarter. If
the Company's sales were materially different from seasonal norms during the
fourth quarter, the Company's annual operating results could be materially
affected. Accordingly, results for the individual quarters are not necessarily
indicative of the results to be expected for the entire year.

COMPETITION.

The markets in which the Company participates are highly competitive and served
by a significant number of catalog companies and retailers including traditional
department stores, so-called "off-price" and discount retailers and specialty
chains. The Company's success is highly dependent upon its ability to maintain
its existing customer lists, solicit new customers, identify distinct fashion
trends and continue to address the fashion tastes of its customers.

EMPLOYEES.

During 1993, the Company employed between approximately 7,600 and 16,700 full-
time equivalent employees, depending on the time of year, reflecting the
seasonality of the Company's business and the variations in its workforce during
the year. At February 28, 1994, the Company employed 11,104 full-time
equivalent employees.

Spiegel is a party to three collective bargaining agreements. Approximately
2,000 full-time equivalent employees are covered by an agreement between Spiegel
and the Warehouse, Mail Order, Office, Technical and Professional Employees
Union, Local 743, affiliated with the International Brotherhood of Teamsters,
Chauffeurs, Warehousemen, and Helpers of America ("Local 743"). This agreement,
which is scheduled to expire on February 28, 1995, will be affected by the
closure of Spiegel's Chicago catalog distribution facility. The Company intends
to provide affected workers with all termination benefits called for by the
agreement, as well as additional benefits such as early retirement enhancements,
stay pay, job counseling and vocational training.

Approximately 280 full-time equivalent employees of certain Spiegel outlet
stores are covered by a separate agreement with Local 743. This agreement
expires on May 31, 1994, and will be subject to negotiation in the ordinary
course. Approximately 120 full-time equivalent employees are covered by an
agreement with Teamsters Union 929 Philadelphia, affiliated with the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of
America. This agreement expires on January 31, 1996.

The Company considers its relations with its employees to be good and has never
experienced any material interruption of operations due to labor disagreements
with its employees.

<PAGE>

ITEM 2. PROPERTIES

The Company's corporate headquarters is located in leased office space in
Downers Grove, Illinois. In addition, all of the Company's retail store
locations are leased, with the exception of a downtown San Francisco Eddie Bauer
store, a downtown Chicago Eddie Bauer store and a Chicago Spiegel outlet store.
A typical store lease is for a term of 10 years, with options for renewal.

The principal properties and facilities used in Spiegel's catalog operations
consist of approximately 20 warehouses and office buildings located in and
around Chicago, Illinois. These facilities are primarily owned. Eddie Bauer's
current retail and catalog distribution facilities are located in Columbus,
Ohio, two of which are owned and four of which are leased. Eddie Bauer also
occupies office space in 10 buildings located in and around Seattle, Washington,
two of which are owned and eight of which are under lease. The Company's new
Groveport, Ohio catalog distribution facility, which is being constructed on
land owned by the Company, is expected to be completed in 1994 and is designed
to consolidate the majority of catalog distribution functions of Spiegel and
Eddie Bauer. The Company plans that Eddie Bauer will begin fulfilling catalog
orders from the new facility in 1994, however fulfillment of Spiegel catalog
orders is expected to begin in 1995. The Company has made provision for the
closing of certain of its catalog distribution facilities, as described in note
4 to the Company's Consolidated Financial Statements.

The Company leases customer order centers in Reno, Nevada, Bensalem,
Pennsylvania and Norcross, Georgia, and customer service facilities in Rapid
City, South Dakota and Oakbrook, Illinois. The Company owns its Westmont,
Illinois corporate data center.

New Hampton leases office space in New York, New York. Its order taking,
customer service and administrative functions are performed in a leased
facility, and its distribution function is performed in an owned facility, both
of which are located in Hampton, Virginia. New Hampton also owns approximately
80 acres of vacant land in Hampton, Virginia adjacent to its distribution
facility. At present, there are no plans to either expand upon or dispose of
this vacant land.

FCNB's headquarters is located in leased office space in Beaverton, Oregon
(suburban Portland).

The Company considers its present space and facilities under development
adequate for anticipated future requirements.

ITEM 3. LEGAL PROCEEDINGS

The Company is routinely involved in a number of legal proceedings and claims
that cover a wide range of matters. In the opinion of management, the outcome
of these matters is not expected to have any material adverse effect on the
consolidated financial position or results of operations of the Company.

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

None.

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PART II

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

A. MARKET INFORMATION.

The Class A Non-Voting Common Stock is traded on NASDAQ's National Market
System. The ticker symbol is SPGLA. Daily trading information is listed in the
stock tables carried by major newspapers as "SPIEGEL". See Item 8 "Selected
Quarterly Financial Data" for information on the high and low sales prices of
the Class A Non-Voting Common Stock.

On March 18, 1994, the closing sales price of the Class A Non-Voting Common
Stock, as quoted on the NASDAQ National Market System was $22 per share.

B. HOLDERS

There were approximately 4,200 Class A Non-Voting Common Stockholders as of
March 18, 1994. The Company believes that certain of the outstanding shares of
Class A Non-Voting Common Stock are held by nominees for an unknown number of
beneficial stockholders.

The Class B Voting Common Stock of the Company is privately held and is not
publicly traded. As of the date hereof, there were seven Class B Voting Common
Stockholders.

C. DIVIDENDS

The Company's policy since 1987 has been to pay regular cash dividends
quarterly. Additionally, the Company has also paid a special cash dividend in
the second quarter of each year. Cash dividends per share paid for the years
ended December 31, 1993 and 1992 are as follows:

First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1993 $ .035 $ .075 $ .035 $ .050 $ .195
1992 $ .035 $ .075 $ .035 $ .035 $ .180

</TABLE>

Cash dividends per share for 1992 and the first three quarters of 1993 have been
restated from amounts previously reported to reflect the two-for-one split in
the Company's outstanding common stock effected by the 100% stock dividend
declared and paid in 1993.

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

Five-Year Selected Financial Data

Years ended December 31 ($000s omitted, except per share amounts)

EARNINGS DATA
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales and
other revenues $2,596,147 $2,218,732 $1,976,308 $1,993,428 $1,695,806
Earnings before
income taxes(1) 87,363 69,367 30,793 100,540 120,240
Net earnings(2) $ 48,705 $ 43,224 $ 16,921 $ 61,522 $ 73,282
Net earnings per
common share(2,3) $ .47 $ .42 $ .16 $ .59 $ .71
Cash dividends per
common share(3) $ .20 $ .18 $ .18 $ .18 $ .18

BALANCE SHEET DATA
Current assets $1,592,665 $1,302,838 $1,305,217 $1,341,521 $1,060,315
Total assets 2,210,591 1,785,213 1,728,163 1,746,299 1,426,519

Current liabilities 627,247 495,131 374,768 399,744 336,041
Long-term debt, excluding
current maturities 971,683 764,235 841,196 831,150 619,400
Stockholders' equity $ 567,485 $ 478,345 $ 453,598 $ 455,095 $ 412,197

<FN>

(1). Operating income for 1993 included a $39,000 charge recorded in the third
quarter to reflect the estimated impact of closing certain of the Company's
existing catalog distribution facilities.

(2). Net earnings for 1992 include income of $4,101, or $.04 per share, for the
cumulative effect of accounting changes for postretirement health care
benefits and inventory overhead capitalization.

(3). Net earnings per common share and cash dividends per common share for 1989
through 1992 have been restated to reflect the two-for-one split in the
Company's outstanding common stock effected by the 100% stock dividend declared
and paid in 1993.

</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ($000S OMITTED, EXCEPT PER SHARE AMOUNTS)

In August 1993, the Company completed the purchase of substantially all of the
assets of New Hampton, Inc. for approximately $40,000. New Hampton is a
specialty catalog company selling predominantly women's apparel at moderate
price points.

In September 1993, the Company announced an arrangement with Otto-Sumisho, Inc.
(a joint venture between Otto Versand and Sumitomo Corporation) to sell Eddie
Bauer products through retail stores and catalogs in Japan. Three Eddie Bauer
stores are expected to open in Japan in the Fall of 1994 along with the
introduction of the Japanese Eddie Bauer catalog. Also in September 1993, the
Company and Time Warner jointly announced their intention to create two new
catalog home shopping channels for cable television. The channels are expected
to debut in 1994.

<PAGE>

Beginning in 1991, the Company implemented several changes at Spiegel and Eddie
Bauer, including merchandising strategies aimed at increasing market share and
maximizing sales to existing customers. These strategies include more aggressive
value pricing of Spiegel and Eddie Bauer products and changes in catalog
presentation. In addition, Eddie Bauer changes include narrowing and refocusing
the merchandise assortment to emphasize key items or "essential styles" which
are supported by a stronger inventory position. The Company believes that these
changes were instrumental in the improved performance in 1992 and 1993 in its
merchandise businesses. In 1993, net sales grew 19% to $2,337,235, including 23%
growth in Eddie Bauer net sales, with a comparable store sales increase of 11%.
Net sales in 1992 grew 14% to $1,972,283, including 24% growth in Eddie Bauer
net sales, with a comparable store sales increase of 17%.

RESULTS OF OPERATIONS

The following table sets forth certain items from the Company's consolidated
financial statements as a percent of total revenue or net sales for the years
ended December 31, 1993, 1992 and 1991.

1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net sales and other revenues:
Net sales 90.0% 88.9% 87.7%
Finance revenues 7.5% 7.8% 9.3%
Other revenues 2.5% 3.3% 3.0%
-------- -------- --------
100.0% 100.0% 100.0%
As a percent of net sales:
Gross profit 34.3% 31.8% 32.3%
As a percent of total revenues:
Selling, general and
administrative expenses 33.2% 32.2% 34.4%
Nonrecurring charge 1.5% 0.7% 0.5%
Operating income 6.1% 6.6% 5.6%

</TABLE>

1993 COMPARED WITH 1992

Net sales for the year ended December 31, 1993 increased 19% to $2,337,235
compared with $1,972,283 for the year ended December 31, 1992. This increase
resulted from positive response to merchandise offerings at Spiegel and Eddie
Bauer. Total Company catalog sales of $1,497,063 increased 18% for the year
ended December 31, 1993 compared with the year ended December 31, 1992, due in
part to aggressive catalog customer acquisition programs. Retail sales of
$840,172 for the year ended December 31, 1993 increased $135,001, or 19%,
compared with the year ended December 31, 1992, due primarily to Eddie Bauer's
11% increase in comparable store sales and, to a lesser extent, new store
openings. The comparable store sales increase is primarily due to Eddie Bauer's
change in its merchandise focus and retail store remodeling program initiated in
1991.

Finance revenue for the year ended December 31, 1993 increased $20,959, or 12%
over the year ended December 31, 1992 due to higher average customer accounts
receivable in the current year. This increase in average customer accounts
receivable was attributable to a higher level of Preferred Charge sales and a
reduction in customer accounts receivable sold. Other revenue for the year ended
December 31, 1993 decreased $8,496, or 12% from 1992, due to the effects of
sales of customer accounts receivable in 1992, partially offset by the effects
of the sale of a small portfolio of MasterCard receivables in 1993.

<PAGE>

Gross profit margin on net sales for the year ended December 31, 1993 was 34.3%
compared with 31.8% for the year ended December 31, 1992. This improvement was
due to lower levels of promotional activity throughout 1993 compared with 1992
and, to a lesser extent, lower costs associated with improved sourcing of
merchandise.

Selling, general and administrative expenses as a percent of total revenues for
the year ended December 31, 1993 and 1992 were 33.2% and 32.2%, respectively.
This expense ratio for the year ended December 31, 1992 was favorably impacted
by revenue (with only nominal selling, general and administrative costs) related
to the effects of sales of customer accounts receivable. The expense ratio for
the year ended December 31, 1993 was not similarly impacted. Also reflected in
this ratio was the relatively higher expense levels at newly acquired New
Hampton, Inc.

The Company plans to relocate certain of its distribution operations to a new
facility in Groveport, Ohio, which will consolidate the majority of catalog
distribution functions of Spiegel and Eddie Bauer. With this state-of-the-art
facility, the Company expects to realize increased productivity and efficiency
within its distribution functions and achieve reductions in overall relative
costs. The transition from the existing facilities to the new distribution
facilities is expected to begin in 1994 and to be completed by mid-1995.

Included in operating results for 1993 was a $39,000 nonrecurring charge
recorded in the third quarter to reflect the estimated impact of closing certain
of the Company's existing catalog distribution facilities. These existing
facilities consist principally of 20 warehouses and office buildings located in
Chicago, Illinois. The $39,000 charge to earnings is comprised of termination
benefits of $24,600 and other related costs of $14,400. The Company expects a
portion of these costs will be paid in 1994 and the remainder in 1995, with the
exception of the write-off of property and equipment of $6,500, which is a
noncash item. Certain members of operations management will be relocated to the
new distribution facility. The Company expects to reduce its number of
distribution facility employees with this consolidation.

Interest expense for the year ended December 31, 1993 was $3,830 lower than in
1992 due to a reduction in the Company's effective borrowing rate. Partially
offsetting the effect of the lower borrowing rate was higher average debt
maintained to finance higher average inventory levels, higher average levels of
customer accounts receivable, continued expansion of the Eddie Bauer retail
division, expenditures relating to the new distribution facility and the
purchase of New Hampton.

The effective tax rate for 1993 was 44.2% compared with 43.6% in 1992. This
increase was primarily due to a change in the federal statutory corporate tax
rate from 34% to 35% enacted in the third quarter of 1993 and retroactive to
January 1, 1993. In accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," income tax expense for 1993 included a
charge to cumulatively adjust taxes currently payable and deferred income taxes
on the balance sheet to reflect the new tax rate.

1992 COMPARED WITH 1991

Net sales for the year ended December 31, 1992 increased $238,762, or 14%, to
$1,972,283 from 1991's recession-related levels. Fourth quarter net sales of
$814,153 (a 25% increase over 1991's fourth quarter net sales of $652,896) had a
significant impact on the year's results. A 17% increase in comparable store
sales at Eddie Bauer as well as the net addition of 28 Eddie Bauer stores
contributed to the 26% increase in the Company's retail store sales of $705,171
in 1992. Catalog sales in 1992 increased $93,532, or 8%, compared with 1991.

<PAGE>

Finance revenue decreased $9,480, or 5%, in 1992, reflecting lower average
outstanding customer accounts receivable due to the sales of customer accounts
receivable. As a result of these sales of customer accounts receivable, other
revenue increased in 1992 by $10,533.

Gross profit margin on net sales for 1992 declined to 31.8% from 1991's 32.3%.
This decrease was due to the effects of an aggressive pricing strategy aimed at
gaining market share and providing value to the Company's customers, only
partially offset by an improvement in fourth quarter gross profit margin, which
improved to 36.5%, nearly two percentage points over the 1991 fourth quarter
results. The fourth quarter increase reflected the strong sell-through of
merchandise as well as lower markdowns taken in the Fall season of 1992 compared
with 1991.

Selling, general and administrative expenses as a percent of total revenues
decreased to 32.2% in 1992 from 34.4% in 1991. Contributing to this positive
trend were the effect of the sales of customer accounts receivable, improvement
in credit performance and stringent cost controls throughout the Company.

During 1991, the decision was made to close the retail division of Honeybee,
Inc. and consolidate the Honeybee catalog operations with Spiegel. As part of
this restructuring, a $10,800 charge was included in 1991's fourth quarter
operating results. The Company continued to use the Honeybee name in its
catalogs. In late 1992, it became apparent that Honeybee's merchandise
performance did not support the trademarks and goodwill included in the balance
sheet. Accordingly, a $14,467 nonrecurring charge reflecting the permanent
impairment of these assets was included in the fourth quarter operating results
for 1992.

Interest expense decreased 4% from 1991 due to the Company's lower average
borrowing rate in 1992. This rate decrease was realized primarily through
variable rate financing, which is principally comprised of commercial paper.
Partially offsetting the lower borrowing rate were overall higher average
borrowings required during the year. The increased borrowings were the result of
continued growth of the Eddie Bauer retail division as well as overall higher
inventory levels maintained to service greater sales demand.

The Company's effective tax rate decreased to 43.6% in 1992 from 45.0% in 1991
primarily due to the relative impact of the amortization of non-deductible
goodwill as a percentage of earnings before taxes.

In 1992, the Company adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and
elected to immediately recognize the accumulated postretirement benefit
obligation. Accordingly, net earnings included a charge of $3,304, or $.03 per
share, for the cumulative effect of this accounting change.

Also in 1992, the Company changed its method of determining inventory costs to a
full absorption basis in order to more closely match revenues with expenses.
Certain purchasing, warehousing and transportation costs which were previously
expensed as incurred are now capitalized and expensed in the period in which the
related inventory is sold. The cumulative effect of applying this change was a
net earnings increase of $7,405, or $.07 per share.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically met its operating and cash requirements through
funds generated from operations, the issuance of debt and the sale of customer
accounts receivable. Customer accounts receivable sold were $330,000 and
$380,000 at December 31, 1993 and December 31, 1992, respectively. In 1993, the
Company issued 3,600,000 shares of Class A non-voting common stock. Proceeds
from this transaction were $61,546.

Capital expenditures for 1993 and 1992 were $104,489 and $58,779, respectively.
The higher level of capital expenditures in 1993 compared with 1992 was related
to the new catalog distribution facility as well as the continued expansion and
remodeling of Eddie Bauer stores. Through December 31, 1993, total expenditures
relating to the new distribution facility were $94,716. The total cost of the
facility including related equipment expenditures is estimated to be
approximately $135,000, with equipment financing provided through an operating
lease. The remainder of costs associated with the construction of the facility
are expected to be paid in 1994.

As of December 31, 1993, total debt was $1,060,835, compared with $875,785 as of
December 31, 1992. This higher level of debt was required primarily to finance
higher average inventory levels, higher average customer accounts receivable
owned, the purchase of New Hampton, the continued expansion of the Eddie Bauer
retail division and expenditures related to the new catalog distribution
facility.

Average customer accounts receivable levels were greater than the comparable
1992 levels due to increased sales and a reduction in customer accounts
receivable sold. The reduction in customer accounts receivable sold was due to
the termination in 1992 of two customer accounts receivable financing programs.
In 1993, FCNB sold $32,756 of customer accounts receivable which arose from a
discontinued MasterCard affinity program. Although the proceeds of the sale are
reflected as a component of the Company's cash equivalents, under banking
regulations these proceeds are primarily available only to meet FCNB's operating
and cash requirements.

The Company believes that its cash on hand, together with cash flow anticipated
to be generated from operations, borrowings under its existing credit facilities
and other available sources of credit will be adequate to fund the Company's
capital and operating requirements for the foreseeable future, including
expenditures relating to the new catalog distribution facility and new store
openings.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED BALANCE SHEETS

At December 31 ($000s omitted, except per share amounts)

1993 1992
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 47,389 $ 3,604
Receivables, net 998,525 816,545
Inventories 438,869 410,801
Prepaid expenses 59,845 50,360
Deferred income taxes 48,037 21,528
------------ ------------
Total current assets 1,592,665 1,302,838
Property and equipment, net 288,551 205,011
Intangibles, net 189,454 197,072
Other assets 139,921 80,292
------------ ------------
$2,210,591 $1,785,213
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 89,152 $ 111,550
Accounts payable 226,311 175,888
Accrued liabilities:
Salaries and wages 32,255 24,016
General taxes 97,764 88,972
Closing of distribution facilities 38,480 -
Other accrued liabilities 103,724 77,003
Income taxes 39,561 17,702
------------ ------------
Total current liabilities 627,247 495,131

Long-term debt, excluding current maturities 971,683 764,235
Deferred income taxes 44,176 47,502
------------ ------------
Total liabilities 1,643,106 1,306,868
Stockholders' equity:
Class A non-voting common stock, $1.00 par
value; authorized 16,000,000 shares;
14,599,824 shares issued and outstanding
at December 31, 1993; 12,000,000 shares
issued and 10,863,004 outstanding
at December 31,1992 14,600 12,000
Class B voting common stock, $1.00 par value;
authorized 94,000,000 shares; 93,141,654
shares issued and outstanding at
December 31, 1993 and 1992 93,142 93,142
Additional paid-in capital 209,029 154,333
Retained earnings 250,714 223,906
Less: Treasury stock, 1,136,996 Class A
non-voting common shares, at
December 31, 1992, at cost - (5,036)
------------ ------------
Total stockholders' equity 567,485 478,345
------------ ------------
$2,210,591 $1,785,213
============ ============

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

CONSOLIDATED STATEMENTS OF EARNINGS

Years ended December 31 ($000s omitted, except per share amounts)

1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES AND OTHER REVENUES
Net sales $2,337,235 $1,972,283 $1,733,521
Finance revenue 194,984 174,025 183,505
Other revenue 63,928 72,424 59,282
---------- ---------- ----------
2,596,147 2,218,732 1,976,308
COST OF SALES AND OPERATING EXPENSES
Cost of sales, including buying and
occupancy expenses 1,536,642 1,344,711 1,174,459
Selling, general and
administrative expenses 860,917 714,132 680,642
Nonrecurring charge 39,000 14,467 10,800
---------- ---------- ----------
2,436,559 2,073,310 1,865,901

Operating income 159,588 145,422 110,407

Interest expense 72,225 76,055 79,614
---------- ---------- ----------
Earnings before income taxes and
cumulative effect of accounting changes 87,363 69,367 30,793

Income taxes 38,658 30,244 13,872
---------- ---------- ----------
Earnings before cumulative
effect of accounting changes 48,705 39,123 16,921

Cumulative effect of accounting
changes, net of income taxes of $3,171 - 4,101 -
---------- ---------- ----------
Net earnings $48,705 $ 43,224 $ 16,921
========== ========== ==========

Net earnings per common share before
cumulative effect of accounting changes $ 0.47 $ 0.38 $ 0.16

Cumulative effect of accounting changes - 0.04 -
---------- ---------- ----------
Net earnings per common share $ 0.47 $ 0.42 $ 0.16
========== ========== ==========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended December 31 ($000s omitted, except per share amounts)
<TABLE>
<CAPTION>

Treasury stock-
Class A Class B Additional Class A
non-voting voting paid-in Retained non-voting
Total common stock common stock capital earnings common
----------- ------------- ------------ ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1990 $455,095 $12,000 $93,142 $154,236 $201,182 $(5,465)
Net earnings 16,921 16,921
Cash dividends
($.18 per share) (18,706) (18,706)
Issuance of 54,100
treasury shares 288 49 239
----------- ------------- ------------ ----------- ------------ ----------------
Balances at
December 31, 1991 453,598 12,000 93,142 154,285 199,397 (5,226)
Net earnings 43,224 43,224
Cash dividends
($.18 per share) (18,715) (18,715)
Issuance of 42,804
treasury shares 238 48 190
----------- ------------- ------------ ----------- ------------ ----------------
Balances at
December 31, 1992 478,345 12,000 93,142 154,333 223,906 (5,036)
Net earnings 48,705 48,705
Cash dividends
($.20 per share) (20,298) (20,298)
Issuance of 3,627,600
common shares 61,705 3,628 58,077
Issuance of 109,220
treasury shares 627 144 483
Retirement of 1,027,776
treasury shares - (1,028) (3,525) 4,553
Excess of additional pension
liability over unrecognized
prior service cost (1,599) (1,599)
----------- ------------- ------------ ----------- ------------ ----------------
Balances at
December 31, 1993 $567,485 $14,600 $93,142 $209,029 $250,714 $ -
=========== ============= ============ =========== ============ ================

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31 ($000s omitted, except per share amounts)

1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 48,705 $ 43,224 $ 16,921
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Cumulative effect of change
in method of accounting for inventory costs - (13,130) -
Cumulative effect of adoption of SFAS No. 106
for certain postretirement benefits - 5,858 -
Write-down of property and
equipment of certain
distribution facilities 6,500 - -
Depreciation and amortization
of property and equipment 34,336 30,889 28,429
Amortization of intangibles 9,115 24,105 10,241
Change in assets and liabilities,
net of effects of acquisition:
Sale of customer accounts receivable 32,756 330,000 75,000
Increase in receivables, net (209,800) (252,085) (46,988)
(Increase) decrease in inventories, net 2,447 (90,667) 29,133
(Increase) decrease in prepaid expenses (1,272) (701) 4,850
Increase (decrease) in accounts payable 44,553 30,355 (18,120)
Increase in accrued liabilities 59,678 16,214 25,828
Increase (decrease) in income taxes (6,707) 14,706 (17,605)
----------- ----------- -----------
Total adjustments (28,394) 95,544 90,768
----------- ----------- -----------
Net cash provided by operating activities 20,311 138,768 107,689
----------- ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of New Hampton, net of cash acquired (39,492) - -
Net additions to property and equipment (104,489) (58,779) (52,282)
Net additions to other assets (59,629) (55,644) (4,556)
----------- ----------- -----------
Net cash used in investing activities (203,610) (114,423) (56,838)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings of debt 241,600 91,718 65,000
Payments of debt (56,550) (112,613) (84,770)
Dividends paid (20,298) (18,715) (18,706)
Issuance of common shares 61,705 - -
Issuance of treasury shares 627 238 288
----------- ----------- -----------
Net cash provided by (used in)
financing activities 227,084 (39,372) (38,188)
----------- ----------- -----------
Net change in cash and cash equivalents 43,785 (15,027) 12,663
Cash and cash equivalents at
beginning of year 3,604 18,631 5,968
----------- ----------- -----------
Cash and cash equivalents at end of year $ 47,389 $ 3,604 $ 18,631
Supplemental cash flow information
Cash paid during the year for:
Interest $ 69,242 $ 75,164 $ 78,301
Income taxes $ 41,035 $ 25,628 $ 32,194

</TABLE>

See accompanying notes to consolidated financial statements.

SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING ACTIVITY

During 1993, the Company incurred an additional pension obligation liability of
$4,365 with corresponding charges to equity of $1,599 (net of taxes of $1,269)
and intangibles of $1,497 related to the closing of certain existing catalog
distribution facilities.

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($000s omitted, except per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Spiegel, Inc. and
its wholly-owned subsidiaries (the Company). All significant transactions and
balances among the companies included in the consolidated financial statements
have been eliminated in consolidation.

REVENUE RECOGNITION

Sales made under installment accounts represent a substantial portion of net
sales. Finance revenue on customer installment accounts receivable is recorded
as income when earned, using the effective yield method. The Company provides
for returns at the time of sale based upon projected merchandise returns.

CASH EQUIVALENTS

Cash equivalents consist principally of highly liquid government securities with
maturities ranging from three to nine months.

INVENTORIES

Inventories, principally merchandise available for sale, are stated at the lower
of cost or market. Cost is determined primarily by the average cost method or
the weighted average cost method. Cost of certain other inventories is
determined by the first-in, first-out method.

CATALOG COSTS

Prepaid catalog costs are amortized over the expected lives of the catalogs,
which are less than one year.

STORE PREOPENING COSTS

Preopening and start-up costs for new stores are charged to operations as
incurred.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation of property and equipment is computed using the
straight-line method over the estimated useful lives of the assets. Annual
depreciation rates range from 2% to 20% for buildings and improvements and 10%
to 50% for furniture and equipment. Leasehold improvements are amortized over
the lesser of the term of the lease or asset life.

INTANGIBLES

Intangible assets represent principally trademarks and the excess of cost over
the fair market value of net assets of businesses purchased. The Company
amortizes these intangibles in relation to the anticipated benefits to be
derived from the businesses acquired, not to exceed 40 years. Total accumulated
amortization of these intangibles was $47,212 and $38,804 at December 31, 1993
and 1992, respectively.

EMPLOYEE PENSION PLANS

Company policy is to, at a minimum, fund the pension plans to meet the
requirements of the Employee Retirement Income Security Act of 1974 (ERISA). In
1992 the Company made additional contributions in order to fully fund the
accumulated benefit obligation.

<PAGE>

INCOME TAXES

The Company uses the liability method in accounting for income taxes pursuant to
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The Company is included in the
consolidated federal income tax return of Spiegel, Inc.'s parent, Spiegel
Holdings, Inc.

EARNINGS PER SHARE

Earnings per share is based on the weighted average number of both classes of
common shares outstanding during the year.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified from amounts previously
reported to conform with the 1993 presentation.

2. ACCOUNTING CHANGES

In 1993 the Company adopted SFAS No. 109 and applied its provisions
retroactively to January 1, 1988. Since this accounting change had no impact on
the Company's earnings for any year from 1988 through 1992, there is no
cumulative effect related to the accounting change to report. The restatement
for the change relates to the classification of certain deferred tax assets and
liabilities as to current versus long-term from those amounts reported under
SFAS No. 96.

In 1992, the Company refined its method of determining inventory costs to
include capitalization of certain purchasing, warehousing, storage and
transportation costs. Previously, these costs were charged to expense in the
period incurred rather than in the period in which the related inventory was
sold. The Company believes that this refinement provides a better measurement of
operations by more closely matching revenues with expenses. The cumulative
effect of applying this change in accounting on prior periods of $7,405 (net of
income taxes of $5,725) is included in net earnings for 1992. For 1992, the
effect of this change was to increase operating income by $3,334. Had the change
been applied retroactively, the effect on 1991 operations would not have been
material.

In 1992, the Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The Company elected to immediately
recognize the cumulative effect of the change in accounting for post-retirement
benefits of $3,304 (net of income tax benefit of $2,554) which represents the
accumulated postretirement benefit obligation existing at January 1, 1992. The
impact of this change on 1992 operations was not material.

3. ACQUISITION

On August 27, 1993, the Company acquired substantially all of the assets of New
Hampton, Inc. (New Hampton) through a bankruptcy proceeding for approximately
$40,000 in cash. New Hampton is a specialty catalog company offering
fashionable, moderately priced women's apparel. While the valuation of net
assets acquired has not been completed, management believes the fair value of
net assets acquired will exceed or approximate the purchase price. Accordingly,
no goodwill has been recorded. The operating results of New Hampton subsequent
to the acquisition date are included in the consolidated financial statements of
the Company.

<PAGE>

4. NONRECURRING CHARGES

The Company plans to relocate certain of its catalog distribution operations to
a new facility in Groveport, Ohio, which will consolidate the majority of
catalog distribution functions of Spiegel and Eddie Bauer. Included in operating
results for the third quarter of 1993 is a $39,000 nonrecurring charge to effect
the estimated costs for closure of certain of the Company's existing catalog
distribution facilities. The third quarter charge to earnings consists of
estimates for termination benefits, disposal of certain fixed assets and other
related costs.

In 1991 the Company decided to restructure Honeybee's operations by
consolidating its catalog operations with Spiegel's and by closing the Honeybee
retail stores. Operating income was reduced by $10,800 in 1991 for this
restructuring. The Company continued to use the Honeybee name in its catalogs;
however, it became apparent late in 1992 that Honeybee's merchandise performance
did not support the trademarks and goodwill included in the balance sheet.
Accordingly, operating income was reduced in 1992 by $14,467 to reflect the
permanent impairment of these assets.

5. RECEIVABLES

Receivables consist principally of proprietary credit card receivables generated
in connection with the sale of the Company's merchandise. The Company's customer
base is diverse, in terms of both geographic and demographic coverage. Due to
the revolving nature of the credit card portfolio, management believes that the
current carrying value of credit card receivables approximates fair value. The
collectibility of the credit card portfolio is stable and the average interest
rate collected on the receivables approximates the current market rates on new
accounts.

Receivables at December 31, 1993 and 1992 consist of the following:

1993 1992
----------- -----------
<S> <C> <C>
Customer receivables serviced $1,403,618 $1,257,736
Customer receivables sold (330,000) (380,000)
----------- -----------
Customer receivables owned 1,073,618 877,736
Less allowance for returns (28,238) (23,960)
Less allowance for doubtful accounts (46,855) (37,231)
----------- -----------
Receivables, net $ 998,525 $ 816,545
=========== ===========

</TABLE>

In 1993, First Consumers National Bank (a wholly-owned subsidiary of the
Company) sold $32,756 of customer accounts receivable which arose from a
discontinued MasterCard affinity program.

During 1992 and 1991, the Company transferred portions of its customer
receivables to trusts which, in turn, sold certificates representing undivided
interests in the trusts to investors. Certificates sold were $330,000 in 1992
and $75,000 in 1991. As a result of these transactions, other revenue increased
by $10,533 in 1992. As of December 31, 1993, $330,000 of the certificates were
outstanding. The bad debt reserve related to the net receivables sold has been
reduced accordingly. In one of the transactions the Company acted as the cash
collateral lender, providing $14,400 for the benefit of that trust. This amount
is included in the Company's other assets. The Company owns the remaining
undivided interest in the trusts not represented by the certificates and will
continue to service all receivables for the trusts.

<PAGE>

Cash flows generated from the receivables in the trusts are dedicated to payment
of fixed rate interest on the certificates, reimbursement of accounts charged
off in the trusts, and payment of servicing fees to the Company. Excess cash
flows revert to the Company and are used to establish reserve funds that are
available if cash flows from the receivables become insufficient to make such
payments. Restricted cash accounts have been maintained for these reserve funds,
none of which has been utilized as of December 31, 1993. The restricted cash of
$35,000 and $21,125 at December 31, 1993 and 1992, respectively, was included in
other assets.

6. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1993 and 1992 consist of the following:

1993 1992
----------- -----------
<S> <C> <C>
Land $ 19,353 $ 13,337
Buildings and improvements 56,776 50,132
Equipment 137,781 119,056
Leasehold improvements 117,364 107,617
----------- -----------
331,274 290,142
Less accumulated depreciation and amortization (116,068) (100,833)
----------- -----------
215,206 189,309
Construction in process 73,345 15,702
----------- -----------
Property and equipment, net $ 288,551 $ 205,011
=========== ===========
</TABLE>

7. LONG-TERM DEBT

The following is a summary of the Company's long-term debt at December 31, 1993
and 1992:

1993 1992
----------- -----------
<S> <C> <C>
Notes payable:
Commercial paper, supported by
stand-by credit commitment $ 290,000 $ 228,400
Revolving credit - 10,000
Term loan agreements, 3.00% to 10.25%,
due March 17, 1994
through October 16, 2000 592,085 513,635
Subordinated notes, 6.56% to 10.31%,
due June 30, 1994
through February 25, 2000 118,750 118,750
Secured notes, 7.25% to 7.35%,
due November 15, 2001 through November 15, 2005 60,000 -
Industrial Development Revenue Bond, 9.0%,
due December 15, 2003 - 5,000
----------- -----------
Total long-term debt 1,060,835 875,785
Less current maturities of long-term debt (89,152) (111,550)
----------- -----------
Long-term debt, excluding current maturities $ 971,683 $ 764,235
=========== ===========

</TABLE>

<PAGE>

At December 31, 1993, outstanding commercial paper of $290,000 has been included
in long-term debt, as the amount of the borrowings that will be outstanding
throughout the period covered by the commitment is not expected to fall below
this level or will be replaced with other long-term financing. This commercial
paper program is supported by an irrevocable stand-by credit commitment of
$450,000 with a group of 13 banks. The credit agreement expires in September
1996 and is subject to annual extension upon mutual agreement of the Company and
banks. If the Company elects to borrow under certain provisions of the credit
agreement, the loans would be payable on the expiration date of this agreement.
Fees paid to the banks do not exceed 3/8 of 1% per year of outstanding
borrowings and 1/4 of 1% of the total commitment. The effective annual interest
rates were 4.2% in 1993 and 5.2% in 1992, including previously mentioned fees.

The Company also borrows funds under a stand-by letter of credit and revolving
credit facility of $125,000 with a group of eight banks. The credit agreement
expires in February 1996. Certain provisions of the credit agreement limit
availability of these funds through a specified time period. This time period
generally coincides with peak cash flows generated by operations of the Company.
Fees paid to the banks are 3/8 of 1% per year based on the unused portion of the
commitment and 3/4 of 1% per year on the average daily face amount of the
outstanding stand-by letters of credit. Borrowings under this commitment were an
average of $21,422 and a maximum of $66,000 during 1993 and were insignificant
in 1992.

Included in notes payable is a $40,000 term loan with the same eight banks with
amortizing payments through 1997. At December 31, 1993, $37,500 of this loan was
outstanding. The agreement stipulates that interest is paid based on the London
Interbank Offering Rate (LIBOR)plus a 1% margin. In January 1993, the Company
entered into an interest rate swap agreement with a major financial institution
that effectively fixes this rate at 6.92%. The notional amount of the swap
agreement corresponds with that of the outstanding debt over the life of the
term loan. The institution is expected to fully perform under the terms of the
agreement, thereby mitigating the risk from this transaction.

The Company has available uncommitted money market lines aggregating $30,000.
Usage under these lines averaged $6,000 during 1993 at various floating rates of
interest.

The Company also has letter of credit facilities to support the purchase of
inventories. The Company had letter of credit facilities of $155,000 and $90,000
at December 31, 1993 and 1992, respectively. Letter of credit commitments
outstanding were $69,786 and $38,952 at December 31, 1993 and 1992,
respectively.

The fair value of the Company's long-term debt, based upon the discounting of
future cash flows using the Company's borrowing rate for loans of comparable
maturity, approximates the carrying value of such debt at December 31, 1993.

Aggregate maturities of long-term debt for the five years subsequent to December
31, 1993 are as follows: 1994, $89,152; 1995, $136,570; 1996, $380,421; 1997,
$91,792; and 1998 and thereafter, $362,900.

8. EMPLOYEE BENEFIT PLANS

The Company has established the following employee benefit plans to recognize
the contributions made to successful operations by the Company's employees.

SAVINGS AND PROFIT SHARING PLANS

Eligible salaried and hourly employees may participate in these plans. As
specified in these plans the Company's annual contributions are determined by
applying a formula to earnings before income taxes. Employees may elect to
contribute a maximum of 10% of their base salary, subject to special
limitations imposed by the Internal Revenue Service. Expense under these plans
was $9,001, $6,983 and $4,374 in 1993, 1992 and 1991, respectively.

<PAGE>

THRIFT PLANS

The Company has thrift plans for its eligible salaried employees in which
employees may elect to contribute up to 6% of their base salary, with the
Company matching the contribution dollar for dollar up to the first 3%, and 50
cents for each dollar contributed up to the next 3%. The Company also has
separate thrift plans for certain eligible hourly employees. Employees may elect
to contribute up to 6% of their base salary with the Company contributing 25
cents for each dollar of employee contributions. Expense under these plans was
$4,092, $3,840 and $3,125 in 1993, 1992 and 1991, respectively.

STOCK OPTION PLAN

The Spiegel, Inc. Semi-Monthly Salaried Employees Incentive Stock Option Plan
provides for the issuance of options to purchase up to 1,600,000 shares of Class
A non-voting common stock to certain salaried employees. Under the plan,
participants are granted options to purchase shares of the specified stock at
the fair market value at the date of grant. The options are exercisable at the
rate of 20% per year.

A summary of the changes in the options outstanding is as follows:

Shares Amount Average Price
----------- ---------- -------------
<S> <C> <C> <C>
Outstanding at January 1, 1991 1,013,100 $ 6,859 $ 6.77
Granted 175,000 1,149 6.56
Exercised (54,100) (289) 5.34
Canceled (44,300) (400) 9.02
----------- ---------- -------------
Outstanding at December 31, 1991 1,089,700 7,319 6.72

Granted 170,800 1,433 8.39
Exercised (42,440) (235) 5.54
Canceled (78,980) (612) 7.75
----------- ---------- -------------
Outstanding at December 31, 1992 1,139,080 7,905 6.94

Granted 206,500 4,595 22.25
Exercised (136,820) (786) 5.75
Canceled (18,120) (157) 8.64
----------- ---------- -------------
Outstanding at December 31, 1993 1,190,640 $11,557 $ 9.71
=========== ========== =============
Exercisable at December 31, 1993 638,320 $ 4,304 $ 6.74
=========== ========== =============

</TABLE>

Total stock options authorized but unissued at December 31, 1993 were 159,900.

PENSION PLANS

The Company also has defined benefit pension plans covering substantially all
employees other than those eligible to participate in the savings and profit
sharing plans and those hourly employees eligible to participate in the thrift
plans. The unit credit actuarial cost method is used in developing the costs of
the pension plans. A flat benefit formula is used to measure the pension benefit
obligation. Due to the relocation of certain of its catalog distribution
operations, the Company recognized a curtailment of a related hourly pension
plan. The impact on net periodic pension cost for 1993 was a charge to operating
income of $12,100, which is included in the $39,000 nonrecurring charge in the
consolidated statements of earnings.

<PAGE>

The net periodic pension cost for the years ended December 31, 1993, 1992 and
1991 is computed as follows:

1993 1992 1991
--------- -------- --------
<S> <C> <C> <C>
Service cost $ 940 $ 914 $ 791
Interest cost 3,562 3,492 3,480
Return on plan assets (7,448) (4,267) (5,601)
Net amortization and deferral 16,046 1,020 2,744
--------- -------- --------
Net periodic pension cost $ 13,100 $ 1,159 $ 1,414
========= ======== ========
</TABLE>

Weighted average assumptions used in accounting for obligations and assets were
as follows:

1993 1992
-------- --------
<S> <C> <C>
Discount rate 7.5% 8.5%
Expected long-term rate of return on assets 9.0% 9.0%

</TABLE>

The following table sets forth the plans' funded status at December 31, 1993 and
1992:

1993 1992
Union Non-Union Union Non-Union
Plan Plan Plan Plan
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Accumulated and projected benefit obligation:
Vested $ 48,296 $ 9,325 $32,399 $ 8,909
Non-Vested 2,076 251 1,953 224
--------- --------- -------- ---------
Total 50,372 9,576 34,352 9,133
Market value of plan assets 40,141 10,695 37,026 10,023
--------- --------- -------- ---------
Over (under) funded projected
benefit obligation (10,231) 1,119 2,674 890
Unrecognized net transition liability 1,475 1,696 3,322 1,909
Unrecognized net (gain) loss from
past experience different from
that assumed and effects
of changes in assumptions 2,890 (462) 1,103 (312)
Additional liability required to recognize
minimum liability (4,365) - - -
--------- --------- -------- ---------
Prepaid (accrued) pension
cost in the balance sheet $(10,231) $ 2,353 $ 7,099 $ 2,487

========= ========= ======== =========
</TABLE>

<PAGE>

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

In addition to the benefits described above, the Company provides certain
medical benefits for eligible retired employees until age 65.

The following table presents the accumulated postretirement benefit obligation
at December 31, 1993 and 1992:

1993 1992
------- -------
<S> <C> <C>
Retirees $1,474 $1,510
Fully eligible active plan participants 955 847
Other active plan participants 5,275 3,971
------- -------
Total 7,704 6,328
Unrecognized loss (1,393) (366)
------- -------
Accrued postretirement benefit cost in the balance sheet $6,311 $5,962
======= =======

</TABLE>

The net periodic postretirement benefit cost for the years ended December 31,
1993 and 1992 is computed as follows:

1993 1992
-------- --------
<S> <C> <C>
Service cost $ 352 $ 352
Interest cost 496 496
-------- --------
Net periodic postretirement benefit cost $ 848 $ 848
======== ========

</TABLE>

For measurement purposes, a 15% annual rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) was assumed for 1992,
the year of adoption of SFAS No. 106. This rate was assumed to decrease 1% per
year to 7% in 2000 and remain at that level thereafter. The health care cost
trend rate assumption has a significant effect on the amounts reported. For
example, increasing the assumed health care cost trend rate by 1 percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1993 by $724 and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for the
year ended December 31, 1993 by $98.

The weighted average discount rates used in determining the accumulated
postretirement benefit obligation were 7.50% and 8.75% at December 31, 1993 and
1992, respectively.

9. INCOME TAXES

The components of income tax expense (benefit) for the years ended December 31,
1993, 1992 and 1991 are as follows:

1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Current $67,223 $27,408 $28,609
Deferred (28,565) 2,836 (14,737)
-------- -------- --------
$38,658 $30,244 $13,872
======== ======== ========
</TABLE>

<PAGE>

The differences between the provision for income taxes at the statutory rate and
the amounts shown in the consolidated statements of earnings for the years ended
December 31, 1993, 1992 and 1991 are as follows:

1993 1992 1991
Amount Percent Amount Percent Amount Percent
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Statutory rate $30,577 35.0% $23,585 34.0% $10,470 34.0%
State income tax (net of
federal income tax benefit) 5,851 6.7 5,064 7.3 2,257 7.2
Tax credits - - - - (720) (2.3)
Amortization of
non-deductible goodwill 1,970 2.2 1,595 2.3 1,865 6.1
Change in statutory rate 260 0.3 - - - -
-------- ------- -------- ------- -------- -------
Effective tax rate $38,658 44.2% $30,244 43.6% $13,872 45.0%
======== ======= ======== ======= ======== =======

</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities at December 31, 1993
and 1992 are as follows:

1993 1992
---------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 16,224 $ 15,275
Allowance for the gross profit
on estimated future returns 12,596 9,068
Reserve for distribution facility and store closings 13,103 929
Compensated absences accruals 4,507 3,584
Pension liability 2,485 -
Deferred rent obligation 2,426 2,584
Postretirement benefit obligation 2,401 2,279
Additional costs inventoried for
tax purposes in excess of book amounts 4,300 1,718
Other 3,439 1,142
---------- ----------
Total deferred tax assets 61,481 36,579
---------- ----------
Deferred tax liabilities:
Property and equipment 42,036 43,366
Prepaid and deferred expenses 5,425 8,557
Gain on sale of accounts receivable 6,005 6,794
Earned but unbilled finance charges 3,193 3,055
Other 961 781
---------- ----------
Total deferred tax liabilities 57,620 62,553
---------- ----------
Net deferred tax assets (liabilities) $ 3,861 $(25,974)
========== ==========

</TABLE>

<PAGE>

10. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company leases office facilities, distribution centers, retail store space
and data processing equipment. Lease terms generally range from 10 to 25 years
and many contain renewal options. Many of the retail store leases provide for
minimum annual rentals plus additional rentals based upon percentage of sales,
which range from 2.5% to 5%. Rental expense for all operating leases was $87,177
in 1993, $77,662 in 1992 and $62,363 in 1991.

The following is a schedule by year of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of December 31, 1993:

Amount
---------
<S> <C>
1994 $ 79,355
1995 74,369
1996 71,272
1997 66,898
1998 and thereafter $394,825

</TABLE>

LITIGATION

The Company is routinely involved in a number of legal proceedings and claims
that cover a wide range of matters. In the opinion of management, the outcome of
these matters is not expected to have any material adverse effect on the
consolidated financial position or results of operations of the Company.

11. STOCKHOLDERS' EQUITY

On October 11, 1993, the holders of a majority of Class B voting common stock of
the Company adopted an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Class A non-voting
common stock of the Company from 8,000,000 to 16,000,000 shares and Class B
voting common stock from 47,000,000 to 94,000,000 shares.

On October 11, 1993, the Board of Directors declared a 100% stock dividend to
stockholders of record on October 22, 1993, payable on November 2, 1993. The par
value of these additional shares was capitalized by a transfer from retained
earnings to common stock of $6,000 for Class A non-voting and $46,571 for Class
B voting common stock. All current and prior year common share and per share
disclosures have been restated to reflect the stock dividend.

On October 22, 1993, the Board of Directors approved the retirement of the
1,027,776 shares of Class A non-voting common stock held in treasury with a
carrying value of $4,553. Accordingly, common stock was reduced by $1,028
representing the par value of the shares and additional paid-in capital was
reduced by $3,525 for the difference between the carrying value of the treasury
shares and the par value.

On December 20, 1993, the Company issued an additional 3,600,000 shares of Class
A non-voting common stock through a public offering. Accordingly, common stock
was increased by $3,600 for the par value of the shares and additional paid-in
capital was increased by $57,946 for the difference between the proceeds from
the issuance and the par value.

12. SUBSEQUENT EVENT

On January 5, 1994 the Company issued 400,000 shares of Class A non-voting
common stock. Accordingly, common stock will be increased by $400 representing
the par value of the shares and additional paid-in capital will be increased by
approximately $6,500 for the difference between the proceeds from the issuance
and the par value.

<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Stockholders and Board of Directors of Spiegel, Inc.:

We have audited the accompanying consolidated balance sheets of Spiegel, Inc.
and subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1993. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Spiegel, Inc. and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1993 in conformity with generally accepted accounting
principles.

As discussed in note 2 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" in 1993 retroactively to 1988. As a result, the
previously issued 1991 and 1992 consolidated financial statements have been
restated. Also discussed in note 2, in 1992 the Company changed its method of
accounting for inventory to include capitalization of certain purchasing,
warehousing, storage and transportation costs, and adopted the provisions of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions."

/s/ KPMG PEAT MARWICK

Chicago, Illinois
February 11, 1994

<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarters ended ($000s omitted, except per share amounts)

1993 March 31 June 30 Sept. 30 Dec. 31 Year End
- ----------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales and
other revenues $ 500,283 $ 515,826 $ 550,334 $1,029,704 $2,596,147
Operating income(1) 22,784 24,257 (6,933) 119,480 159,588
Net earnings $ 2,900 $ 3,995 $ (14,038) 55,848 $ 48,705
Net earnings per
common share(2) $ .03 $ .04 $ (.13) $ .53 $ .47
Weighted average
common shares
outstanding(2) 104,018,576 104,044,812 104,056,992 104,587,533 104,178,208

MARKET PRICE DATA
High(2) $ 12 5/8 $ 13 $ 23 3/8 23 $ 23 3/8
Low(2) 7 3/4 8 3/8 9 3/4 16 5/8 7 3/4

1992
- -----------------------
Net sales and
other revenues $ 426,077 $ 465,954 $457,616 $ 869,085 $2,218,732
Operating income 20,814 19,996 21,309 83,303 145,422
Net earnings(3) $ 5,138 $ 122 $ 1,871 $ 36,093 $ 43,224
Net earnings
per common share(2,3) $ .05 $ .00 $ .02 $ .35 $ .42
Weighted average
common shares
outstanding(2) 103,964,452 103,970,394 103,978,574 103,982,716 103,974,070

MARKET PRICE DATA
High(2) $ 9 $ 7 3/4 $ 7 3/4 $ 8 3/4 $ 9
Low(2) 5 7/8 5 1/2 5 3/8 5 5

<FN>

(1). Operating income for 1993 included a $39,000 charge recorded in the
third quarter to reflect the estimated impact of closing certain of the
Company's existing catalog distribution facilities.

(2). Net earnings per common share, weighted average common shares
outstanding and market price high and low data for the first three quarters
of 1993 and the year 1992 have been restated to reflect the two-for-one
split in the Company's outstanding common stock effected by the 100% stock
dividend declared and paid in 1993.

(3). Net earnings and net earnings per common share for the first quarter
of 1992 include income of $4,101, or $.04 per share, for the cumulative
effect of accounting changes for postretirement health care benefits and
inventory overhead capitalization.

</TABLE>

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

FINANCIAL DISCLOSURE

None.

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

The following persons are the directors of the Company.
<TABLE>
<CAPTION>

Year
Elected as
Name Age Offices with Registrant or Other (4) Director
- ----------------------- ------------------------------------------ ------
<S> <C> <C> <C>
Dr. Michael Otto (1) 50 Chairman of the Board of Directors 1982
and Chairman of the Board of Directors of
Otto Versand (GmbH & Co) for at least the
past five years.

John J. Shea (1)(3) 55 Vice Chairman of the Board of Directors, 1983
President and Chief Executive Officer

Kenneth A. Bochenski 51 Senior Vice President - Operations and 1987
Information Services

Thomas Bohlmann 48 Board of Directors and Director - Planning 1989
and Control of Otto Versand (GmbH & Co)
(1989); Managing Director of a subsidiary
of Otto Versand (GmbH & Co)(1982)

Hans-Christoph Fischer 55 Board of Directors and Director - 1982
Merchandise of Otto Versand (GmbH & Co)
for at least the past five years.

Hans-Jorg Hammer 54 Board of Directors and Director - 1991
Personnel of Otto Versand (GmbH & Co)(1991);
Deputy Director - Personnel of Otto Versand
(GmbH & Co)(1988)

Horst R. Hansen (2)(3) 59 Retired. Prior to March 1994 was a member 1982
of the Board of Directors and Director -
Finance and Chief Financial Officer
of Otto Versand Group

Karl-August Hopmann (2) 58 Retired. Prior to March 1991 was a member 1982
of the Board of Directors and Director -
Personnel of Otto Versand (GmbH & Co)(1988)

Jay A. Lipe (2) 63 Partner in the Chicago, Illinois law firm of 1987
Rooks, Pitts and Poust, outside counsel to
the Company (1964). Rooks, Pitts and Poust
has served as outside counsel to the Company
since 1982.

David C. Moon 51 Senior Vice President - Merchandise 1991

Dr. Peter Muller (1) 52 Board of Directors and Director - 1985
Advertising and Marketing of Otto Versand
(GmbH & Co) for at least the past five years.

Dr. Peer Witten 48 Board of Directors and Director -
Operations of Otto Versand (GmbH & Co) for
at least the past five years. 1991

<FN>

(1) Member of Board Committee (Executive Committee)
(2) Member of Audit Committee
(3) Member of Finance Committee
(4) The business experience during the last five years of directors who are
executive officers of the Company is detailed along with the listing of
executive officers that follows.

</TABLE>

<PAGE>

The terms of all the above-named directors expire on the date of the next
annual meeting of the stockholders which is to be held in April, 1994.

Dr. Michael Otto was a member of the Board of Directors and Director -
Merchandise of Otto Versand for ten years prior to March 1, 1981.

There is no family relationship between any of the directors.

Executive Officers

The following persons are the executive officers of the Company:

Positions and Offices Held
(all positions and offices are of the Company
Name Age unless otherwise indicated)
- ---------------------- --------------------------------------------------
<S> <C> <C>

John J. Shea 55 Vice Chairman (1989), President and Chief Executive
Officer (1985) and Director (1983)

James W. Sievers 51 Chief Financial Officer (1994) and Vice President - Finance (1990);
Senior Vice President - Finance and Operations and Director of
Eddie Bauer (1988); Vice President of Finance of Eddie Bauer (1983)

Alton M. Withers* 67 Retired effective February 28, 1994. Executive Vice President (1990),
Chief Financial Officer (1987) and Director (1976)

Kenneth A. Bochenski 51 Senior Vice President - Operations and Information
Services (1987) and Director (1987)

Harold S. Dahlstrand 49 Senior Vice President - Human Resources (1993);
Vice President - Human Resources (1985)

David C. Moon 51 Senior Vice President - Merchandise (1990); Vice
President - Merchandise (1987) and Director (1991)

Joseph P. Bolduc 50 Vice President - Information Services (1992); Partner in Great Lakes
Management Consulting Group of Ernst & Young (1991); Senior Vice President
and Chief Information Officer of Hart Marx Specialty Stores, Inc. (1982)

James J. Broderick 40 Vice President - Merchandise (1993); Divisional Vice President -
Merchandise (1992); General Merchandise Manager (1991); Merchandise Manager (1988)

Robert E. Conradi 50 Vice President - Merchandise (1987)

Davia L. Kimmey 40 Vice President - Advertising (1992); Vice President - Advertising and Marketing
of Eddie Bauer (1990); Divisional Vice President - Advertising of Eddie Bauer (1988);
Director of Advertising of Eddie Bauer (1987)
Stanley D. Leibowitz 42 Vice President Corporate Planning (1988); Senior Consultant of Strategic
Management Associates, member of the Hay Group, Inc., (1983)

Alois J. Lohn 59 Vice President - Manufacturing (1990); Vice President -
Manufacturing of Jones New York (1989); Vice President -Manufacturing of Liz Claiborne, Inc.
(1982)

</TABLE>

<S> <C> <C>
Michael R. Moran 47 Vice President, Secretary and General Counsel (1988);
Vice President - Administration (1983) and Assistant
Secretary (1978 to 1988)

Georgia Shonk-Simmons** 42 Vice President - Merchandise (1993); Vice President - Merchandise and Corporate Fashion Director
(1991); Vice President and Corporate Fashion Director (1989); Director of Product
Development (1987)

Karl A. Steigerwald 47 Vice President - Marketing (1992); Vice President - Marketing and Information Services (1991);
Vice President - Information Services (1987)

John R. Steele 41 Treasurer (1993); Corporate Finance Director of Deutsche Bank of Chicago (1992); Vice President
and Group Manager of Deutsche Bank (1988)

<FN>

* Alton M. Withers retired as an officer of the Company effective February
28, 1994. He has agreed to continue in an active role with the Company,
performing executive assignments as requested by the President and Chief
Executive Officer.

** Effective May 2, 1994 Georgia Shonk-Simmons will become Executive Vice
President of New Hampton, Inc.

</TABLE>

The terms of all the above-named officers expire on the date of the next annual
meeting of the Board of Directors which is to be held in April, 1994.

There is no family relationship between any of the officers.

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth all compensation paid or accrued by the Company
for the years ended December 31, 1993, 1992 and 1991 to or on behalf of each of
the five most highly compensated key policy-making executive officers of the
Company.

Stock
Name and Annual Compensation Options All Other
Principal Salary Bonus Granted Compensation (1)
Position Year ($) ($) (#) ($)
- -------------------- ---- --------- --------- -------- ----------------
<S> <C> <C> <C> <C> <C>
John J. Shea 1993 $550,000 $605,500 125,000 $143,218
Vice Chairman, 1992 442,000 400,000 40,000 111,611
President, Chief 1991 440,000 284,000 40,000
Executive Officer
and Director

Alton M. Withers 1993 240,000 452,750 5,000 63,877
Executive Vice 1992 222,000 240,000 10,000 74,615
President, Chief 1991 220,000 169,000 10,000
Financial Officer
and Director

Richard T. Fersch 1993 304,225 274,560 5,000 59,886
President of Eddie 1992 272,000 130,800 4,000 44,729
Bauer 1991 192,000 28,400 6,000

Kenneth A. Bochenski 1993 200,000 239,600 5,000 48,776
Senior Vice 1992 177,000 160,000 6,000 39,463
President - 1991 175,000 117,000 10,000
Operations and
Information Services
and Director

David C. Moon 1993 220,000 183,000 5,000 64,923
Senior Vice 1992 202,000 120,000 6,000 54,438
President - 1991 200,000 103,000 10,000
Merchandise and
Director

<FN>

(1) The following tables summarize all other compensation for the years ended
December 31, 1993 and 1992:

</TABLE>

Employer
Profit Life
Supplemental Sharing Insurance Employer
Retirement Car Contrib- Premiums 401(k)
Name Benefits Allowance ution Paid Matching Total
-------------------- ---------- --------- -------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 John J. Shea $43,142 $33,225 $12,928 $47,177 $6,746 $143,218
Alton M. Withers 7,221 16,856 12,928 20,126 6,746 63,877
Richard T. Fersch 24,810 17,294 11,036 - 6,746 59,886
Kenneth A. Bochenski 3,765 15,694 12,503 10,068 6,746 48,776
David C. Moon 5,685 17,411 13,018 22,063 6,746 64,923

1992 John J. Shea $39,581 $29,082 $13,396 $23,343 $6,209 $111,611
Alton M. Withers 5,297 14,710 12,995 35,404 6,209 74,615
Richard T. Fersch 14,772 8,348 15,063 - 6,546 44,729
Kenneth A. Bochenski 2,270 13,733 10,361 6,890 6,209 39,463
David C. Moon 3,952 14,347 11,824 18,106 6,209 54,438

</TABLE>

<PAGE>

OPTION GRANTS TABLE

The following table sets forth grants of stock options to the named executive
officers during the year ended December 31, 1993 and the potential realizable
value of the grants assuming that the market price of the underlying stock
appreciates in value from the date of grant to the end of the option term at the
stipulated annual rates of 5% and 10%:

Number
of Potential Realizable
Securities Percent of Value at Assumed
Under- Total Options Annual Rates of Stock
lying Granted to Price Appreciation
Options Employees Exercise Expiration for Option
Name Granted in 1993 Price Date 5% ($) 10% ($)
- ------------------- -------- -------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John J. Shea 125,000 61% $ 22.25 12/31/03 $1,749,113 $4,432,596

Alton M. Withers 5,000 2% 22.25 12/31/03 69,965 177,304

Richard T. Fersch 5,000 2% 22.25 12/31/03 69,965 177,304

Kenneth A. Bochenski 5,000 2% 22.25 12/31/03 69,965 177,304

David C. Moon 5,000 2% 22.25 12/31/03 69,965 177,304

</TABLE>

The stock options granted become exercisable at the rate of 20% per year from
the date of the grant.

AGGREGATED OPTION EXERCISES IN 1993 AND DECEMBER 31, 1993 OPTION VALUES

The following table sets forth shares acquired on exercise and stock option
values at December 31, 1993:

Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at at
On Value December 31, 1993 December 31, 1993
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Shea 32,000 $433,960 171,000 215,000 $2,681,600 $1,368,250

Alton M. Withers - - 67,000 30,000 1,086,415 373,375

Richard T. Fersch 3,600 41,100 9,600 15,800 129,350 161,575

Kenneth A. Bochenski 3,500 48,895 42,700 21,800 691,645 252,625

David C. Moon - - 34,000 21,000 553,320 242,625

</TABLE>

COMPENSATION OF DIRECTORS

The Company pays an annual fee of $10,000 to its independent directors and
reimburses any reasonable out-of-pocket expenses incurred by all directors in
attending meetings.

<PAGE>

EMPLOYMENT AGREEMENT

The Company has an employment agreement with John J. Shea, President and Chief
Executive Officer of the Company, the term of which extends through December 31,
1994. The annual base salary under this agreement is $550,000. The agreement
entitles Mr. Shea to receive an annual bonus based on a sliding-scale percentage
of the Company's consolidated net income before taxes. Mr. Shea is also
eligible to receive certain other benefits.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board Committee, which determines executive officer compensation, consists
of Dr. Michael Otto, Dr. Peter Muller and John J. Shea. Mr. Shea also serves as
President and Chief Executive Officer of the Company.

EMPLOYEE BENEFITS

STOCK OPTION PLAN.

The Spiegel, Inc. Semi-Monthly Salaried Employees Incentive Stock
Option Plan is administered by a Stock Option Committee
consisting of three members of the Company's Board of Directors
who are not semi-monthly salaried employees of the Company or its
participating subsidiaries and who are appointed to the Committee
from time to time. Certain salaried employees of Spiegel and its
subsidiaries are eligible to participate in the plan. Options
are granted to those eligible employees as the Stock Option
Committee shall select from time to time. The Stock Option
Committee also has authority to determine the number of shares
and terms consistent with the Plan with respect to each option.
Options granted under the plan relate to the Class A Non-Voting
Common Stock of the Company. The maximum number of shares which
may be issued under options granted is 1,600,000 shares. The
participants' options become exercisable at the rate of 20% per
year. The options expire ten years after the date of grant of
options. The option price upon exercise of the option is the
fair market value of the shares on the date of grant of the
option. Options granted under the plan are not transferable or
assignable other than by will or by the laws of descent and
distribution.

The average per share price of stock options granted during the
year was $22.25. Net cash realized with respect to the exercise
of options during the year was approximately $786,000.

SPIEGEL, INC., SAVINGS AND PROFIT SHARING PLAN.

The Company maintains a savings and profit sharing plan covering
its salaried and hourly executives and those of the participating
subsidiaries. Participation commences on January 1 or July 1
after becoming an eligible employee. The Company and
participating subsidiaries contribute annually to the plan 9% of
the first $20 million of consolidated earnings before income
taxes, plus 5.25% of consolidated earnings before income taxes in
excess of $20 million plus any other amounts the Company's Board
of Directors may determine. A minimum total annual contribution
of $575,000 will be made, but in no event will the total
contribution exceed the maximum amount deductible for Federal
income tax purposes. Company contributions and forfeitures are
allocated among eligible participants in proportion to considered
compensation. A participant can make nondeductible voluntary
contributions to the plan of up to 10% of his considered
compensation while a participant, subject to special limitations
imposed by the Internal Revenue Code thereon.

<PAGE>

All contributions are held in a trust for the benefit of plan participants. A
participant receives the full amount in his account under the plan (including
investment earnings) on termination of employment by reason of retirement (as
defined by the plan document) or permanent disability. Upon death, the full
value of the participant's account is distributable to his beneficiary. On any
other termination of employment, a participant is always 100% vested in the
portion of his account attributable to his voluntary contributions and is vested
in the Company's contribution and earnings thereon at a rate based on years of
service, with full vesting after a maximum of seven years. Participants who
suffer financial hardship can withdraw their voluntary contributions from the
plan.

SPIEGEL, INC., EMPLOYEES THRIFT PLAN.

The Company has a thrift plan covering its salaried and hourly executives and
those of its adopting affiliates. Eligible employees may participate as of
January 1 or July 1 following the completion of one year of service by electing
to contribute between 1% and 6% of their base compensation to the plan.
Employee contributions are made on a pretax basis under Section 401(k) of the
Internal Revenue Code. The Company matches salaried employee contributions
dollar for dollar up to the first 3% of base compensation and 50 cents for each
dollar contributed up to the next 3%. The Company matches hourly employee
contributions 25 cents for each dollar contributed up to 6% of base
compensation. The Company's matching contributions, however, may not exceed the
amount deductible under the Internal Revenue Code.

All contributions and investments are held in a trust for the benefit of plan
participants. Employees with three years of service prior to January 1, 1988,
are 100% vested in the entire amounts held for them under the plan. All other
employees who participate in the plan after one year of service are 100% vested
in their pre-tax contributions and earnings thereon but become vested in the
Company's matching contribution and earnings thereon at a rate based on years of
service, with full vesting after a maximum of seven years. Participants who
suffer a financial hardship may withdraw amounts from the plan while still
employed. All participants receive the full value of their accounts under the
plan upon retirement or permanent disability and the vested portion of their
accounts on other termination of employment. The full value of a deceased
participant's account is distributable to his beneficiaries. Distributions are
usually made in a lump sum.

SPIEGEL, INC., SUPPLEMENTAL RETIREMENT BENEFIT PLAN.

The Company maintains a funded supplemental retirement plan for the benefit of
its employees and those of its participating subsidiaries covered by the profit
sharing and thrift plans described above (the "profit sharing and thrift plans")
whose benefits under the profit sharing and thrift plans are reduced by
application of Sections 415, 401(k) and 401(a)(17) of the Internal Revenue Code.
If a participant's annual additions under the profit sharing and thrift plans
are reduced by reason of special limitations of the Internal Revenue Code, the
Company will make an annual contribution to the trust in the amount of the
reduction. Supplemental benefits under the supplemental retirement plan are
payable in cash at the same time and in the same manner as the participant's
employer account under the profit sharing and thrift plans except no payments
are made prior to death, retirement or other termination of employment.

<PAGE>

SPLIT DOLLAR LIFE INSURANCE PROGRAM.

The Company maintains a split dollar life insurance program covering certain
executives of the Company. A covered employee may apply for an individual life
insurance policy on his life in a face amount up to three times his base salary.
The employee pays a portion of the annual premium equal to the after tax cost of
an equivalent amount of term life insurance. The balance of the premium due (if
any) is paid by the Company. The Company owns a part of the cash value equal to
its payments and is beneficiary for that amount. The employee names his own
beneficiary and collaterally assigns the policy to the Company to the extent of
the Company's payments. Cash value and dividends accumulate tax-free and all
amounts in excess of the Company's payments belong to the employee. The Company
premium payments will last only seven years. Future employee contributions will
reduce the amounts advanced by the Company's premium payments. The Company may
withdraw cash at the earlier of the employee's retirement, termination of
employment or the time at which the policy dividends will pay the premium after
the withdrawal. At termination of employment or retirement, the Company may
withdraw its cash value and the employee may either surrender the policy for his
portion of the cash value, receive an income from the insurance company in lieu
of cash, or continue the policy in force. On the death of the employee, the
Company receives any amounts due it with the balance of the proceeds payable as
directed by the employee.

EXECUTIVE BONUS AND INCENTIVE PLANS.

The Company maintains various bonus plans for certain of its executives,
designed to reward performance. The Company's annual payment of bonuses is
based upon the attainment of pre-determined operating and financial objectives.
For 1993, approximately $9,894,000 was paid under these bonus plans.

Certain executives are also eligible for a long-term incentive bonus based on
the Company's performance in 1995. In order for a bonus to be paid, Spiegel
must achieve a pre-determined pre-tax profit in 1995. The formula for payout
will be similar to those used for the normal yearly performance based bonuses.

EDDIE BAUER SAVINGS AND PROFIT SHARING PLAN.

Eddie Bauer maintains a savings and profit sharing plan covering its salaried
and hourly executives. Participation commences on the January 1 or July 1 after
becoming an eligible employee. Eddie Bauer contributes annually to the plan
5.5% of the consolidated earnings of Eddie Bauer before income taxes. A minimum
total annual contribution of $1,100,000 will be made, but in no event will the
total contribution exceed the maximum amount deductible for Federal income tax
purposes. Company contributions and forfeitures are allocated among
participants in proportion to considered compensation. A participant may make
nondeductible voluntary contributions to the plan of up to 10% of their
considered compensation while a participant, subject to special limitations
imposed by the Internal Revenue Code thereon. Contributions are held in a trust
for the benefit of plan participants. A participant receives the full amount in
their account under the plan (including investment earnings) on termination of
employment by reason of retirement (as defined in the Plan document) or
permanent disability. Upon death, the full value of the participant's account
is distributable to their beneficiary. On any other termination of employment,
a participant is 100% vested at all times in the portion of their account
attributable to voluntary contributions and in the balance of their account at a
rate based on years of service, with full vesting after seven years.
Participants who suffer financial hardship may withdraw their voluntary
contributions from the plan.

<PAGE>

EDDIE BAUER EMPLOYEES' THRIFT PLAN.

Eddie Bauer has a thrift plan covering its salaried and hourly employees.
Eligible employees may participate as of the January 1 or July 1 following the
completion of one year of service. Participating employees may elect to
contribute from 1% to 6% of their base compensation to the plan. Employee
contributions are made on a pre-tax basis under Section 401 (k) of the Internal
Revenue Code. The company matches salaried employee contributions dollar for
dollar up to the first 3% of base compensation and 50 cents for each dollar
contributed up to the next 3%. The company matches hourly employee
contributions 25 cents for each dollar contributed up to 6% of base
compensation. The company's matching contributions, however, may not exceed the
amount deductible under the Internal Revenue Code.

Contributions are held in a trust for the benefit of plan participants. A
participant receives the full amount in this account under the plan (including
investment earnings) on termination of employment by reason of retirement (as
defined in the Plan document) or disability. Upon death, the full value of the
participant's account is distributable to their beneficiary. On any other
termination of employment, a participant is 100% vested at all times in the
portion of his account attributable to pre-tax contributions and any earnings
thereon, and is vested in the company's matching contributions and earnings
thereon at a rate based on years of service with full vesting after a maximum of
seven years. Participants suffering certain financial hardships may request in-
service withdrawal of any vested amounts.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

A. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Spiegel Holdings, Inc. (SHI) holds 97.5% of the Company's Class B Voting Common
Stock. The following table sets forth certain information with respect to the
number of shares of Class B Voting Common Stock owned by SHI, which is the only
stockholder beneficially owning more than 5% of the Class B Voting Common Stock.
SHI is a holding company whose principal asset is stock of the Company. The
total number of holders of the Company's Class B voting Common Stock as of
March 18, 1994, was seven.

Percentage of
Outstanding
Number of Title of Class B Voting
Name and Address Shares(1) Class Common Stock
- ------------------------- ----------- --------- ---------------
<S> <C> <C> <C>

Spiegel Holdings, Inc.(2)...................90,814,538 Class B 97.5%
The Corporation Voting
Trust Center Common
1209 Orange Street Stock
Wilmington, DE 19801

<FN>

(1) The shares are owned of record and beneficially, with sole investment and
voting power. However, see note (2) below.

(2) In excess of 50% of the common stock of SHI is beneficially owned by Dr.
Michael Otto who controls the manner in which SHI votes its Class B Voting
Common Stock of the Company in all matters, including the election of
directors. Under rules and regulations promulgated by the Securities and
Exchange Commission, Dr. Otto may be deemed to beneficially own all the
shares of the Company owned by SHI. Dr. Otto is a director of the Company.
No officers or other directors of the Company are stockholders of record or
beneficial stockholders thereof.

</TABLE>

<PAGE>

B. SECURITY OWNERSHIP OF MANAGEMENT

As of March 18, 1994, certain members of the Company's Board of Directors, and
the directors and officers of the Company as a group, owned shares of the
Company's Class A Non-Voting Common Stock as indicated in the following table:

As shown in Column II, in the case of Company officers, portions of the shares
indicated as beneficially owned are actually shares attributable to unexercised
and unexpired options for Class A Common Stock granted by the Company to such
officers, which are exercisable as of, or first become exercisable within 60
days after, March 18, 1994.

Amount and
Name of Nature of
Title Beneficial Beneficial Acquirable Percent
of Class Owner Ownership (2) Within 60 Days of Class (2)
- -------- -------------------- ------------- -------------- ------------
<C> <S> <C> <C> <C>
(I) (II) (III)
Class A Kenneth A. Bochenski 75,000 (1) 42,700 *

Class A Hans-Christoph Fischer 30,000 - *

Class A Karl-August Hopmann 15,000 - *

Class A Jay A. Lipe 2,000 - *

Class A David C. Moon 38,000 34,000 *

Class A Dr. Peter Muller 10,000 - *

Class A John J. Shea 257,000 171,000 1.7%

Class A All directors and
officers as a group
(25 persons) 896,020 432,320 6.0%

<FN>

(1) Includes 600 shares held for member of his immediate family.
(2) Includes shares which may be acquired within 60 days under the Company's
Stock Option Plan.

* Less than 1%.

</TABLE>

ITEM 13. CERTAIN TRANSACTIONS

Since its acquisition of the Company in 1982, and following the transfer of its
interest therein to its partners and designees in April 1984, Otto Versand and
the Company have entered into certain agreements seeking to benefit both parties
by providing for the sharing of expertise in the field of catalog marketing.
The following is a summary of such agreements and certain other transactions.

The Company utilizes the services of Otto Versand International (GmbH) as a
buying agent for the Company in Hong Kong, Taiwan, Korea, India, Italy,
Indonesia, Singapore, Thailand and Turkey. Otto Versand International (GmbH) is
a wholly-owned subsidiary of Otto Versand. Buying agents locate suppliers,
inspect goods to maintain quality control, arrange for appropriate documentation
and, in general, expedite the process of procuring merchandise in these areas.
Under the terms of its arrangements, the Company paid $4,126,000 in 1993,
$3,012,000 in 1992 and $2,143,000 in 1991. The arrangements are indefinite in
term but may generally be canceled by either party upon one year's written
notice.

<PAGE>

The Company has an agreement with Together, Ltd., a United Kingdom company,
which gives the Company the exclusive right to market "Together!" merchandise by
catalog and in retail stores in the U.S.A. Otto Versand owns a 50% interest in
Together, Ltd. Commission expenses incurred on this account were $7,417,000,
$6,007,000 and $5,609,000 in 1993, 1992, and 1991, respectively. These expenses
include certain production services, the cost of which would normally be borne
by the Company, including design of the product, color separation, catalog copy
and layout, identification of suggested manufacturing sources and test marketing
information.

In September 1993, the Company announced an agreement with Otto-Sumisho, Inc. (a
joint venture company of Otto Versand and Sumitomo Corporation) to form a joint
venture and enter into license agreements to sell Eddie Bauer products through
retail stores and catalogs in Japan. The joint venture and license agreements
were executed in 1994. The Company believes that the terms of the arrangement
are no less favorable to Eddie Bauer than would be the case in an arrangement
with an unrelated third party.

In addition, during 1993 Eddie Bauer entered into a limited test marketing
program with Sport Scheck GmbH (a subsidiary of Otto Versand) for the sale of
Eddie Bauer products in Germany and Switzerland through Sport-Scheck catalogs.
The Company believes that the terms of the arrangement are no less favorable to
Eddie Bauer than would be the case in an arrangement with an unrelated third
party. During 1993 Eddie Bauer received approximately $17,000 in royalty income
from Sport-Scheck.

In 1993 Eddie Bauer entered into an agreement with Eddie Bauer International,
Ltd., (a subsidiary of Otto Versand) whereby the latter acts as buying agent in
Asia and contacts suppliers, inspects goods and handles shipping documentation
for Eddie Bauer. The Company believes that the terms of the arrangement are no
less favorable to Eddie Bauer than would be the case in an arrangement with an
unrelated third party. No purchases have been made under this agreement through
December 31, 1993.

In March 1994, New Hampton issued 113 shares of non-voting preferred stock to
nine directors and 11 other executive officers of the Company and nine executive
officers and directors of New Hampton and Otto Versand for $40,000 per share.
The redemption price of the preferred stock prior to December 31, 1997 is the
original purchase price of $40,000 per share. Each participant was eligible to
purchase up to four shares. Subsequent to December 31, 1997, the redemption
price is fair market value. All shares of New Hampton non-voting preferred
stock must be redeemed by December 31, 1999.

The Company is included in the consolidated federal income tax return of SHI.
Pursuant to a tax reimbursement agreement with SHI, the Company records
provisions for income tax expense as if it were a separate taxpayer.

Jay A. Lipe, a director of the Company, is a partner in the firm of Rooks, Pitts
and Poust, which has provided legal services to the Company since 1982. Rooks,
Pitts and Poust is outside counsel to the Company. Rooks, Pitts and Poust also
provides legal services to SHI.

A brother-in-law of Mr. Lipe, Mr. Mark Glazier, is part owner of Circa
Corporation of America which, through its sales agent in New York City, on a job
order basis, sold approximately $848,000 of apparel to the Company in 1993.

<PAGE>

PART IV

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

Page
----

A. 1. FINANCIAL STATEMENTS
<C> <C> <S> <C>
Consolidated Balance Sheets 16
Consolidated Statements of Earnings 17
Consolidated Statements of Stockholders' Equity 18
Consolidated Statements of Cash Flows 19
Notes to Consolidated Financial Statements 20-29
Report of Independent Auditors Relating to Financial
Statements and Notes Thereto 30
Selected Quarterly Financial Data 31

2. FINANCIAL STATEMENT SCHEDULES

Report of Independent Auditors Relating to Financial
Statement Schedules 46
Schedule VIII--Valuation and Qualifying Accounts 47
Schedule X--Supplementary Income Statement Information 48

Schedules not listed above are omitted because of
absence of conditions under which they are required
or because the required information is included in
the financial statements submitted.

</TABLE>

<PAGE>

3. EXHIBITS

Exhibit
Number Description of Exhibit
------ ------------------------------------------------------

<C> <S>
3(a) Restated Certificate of Incorporation of the Registrant
(i)

3(b) By-Laws of the Registrant (i)

4 Revised Specimen Stock Certificate (ii)

10(a) Spiegel, Inc., Semi-Monthly Salaried Employees
Incentive Stock Option Plan (File No. 33-15936) and
post-effective Amendment No. 1 thereto, and the
Company's registration statements on Form S-8 and post-
effective amendments thereto (File No. 33-19663, 33-
32385, 33-38478, 33-44780, 33-56200 and 33-51755) (iii)

10(b) Spiegel, Inc., Supplemental Retirement Benefit Plan
(iv)

13 1993 Annual Report to stockholders.

21 List of subsidiaries of the Registrant

23 Consent of Independent Auditors

24 Powers of Attorney (iv)

<FN>

(i) Filed as an Exhibit to or part of the Company's Registration Statement on
Form S-3 (File No. 33-50739) and hereby incorporated by reference herein.

(ii) Filed as an Exhibit to the 1988 10-K.

(iii) Filed as an Exhibit to or part of the Company's Registration Statement on
Form S-8 (File No. 33-19663, 33-32385, 33-38478, 33-44780, 33-56200 and
33-51755) and hereby incorporated by reference herein.

(iv) Filed as an Exhibit to or part of the Company's Registration Statements on
Form S-1 (File No. 33-15936) and hereby incorporated by reference herein.

B. REPORTS ON FORM 8-K

None.

</TABLE>

<PAGE>

INDEPENDENT AUDITORS' REPORT ON SCHEDULES

The Board of Directors and Stockholders
Spiegel, Inc.:

Under date of February 11, 1994, we reported on the consolidated balance sheets
of Spiegel, Inc., and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1993,
which are included elsewhere herein. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedules as listed in Part IV, Item 14 (A)
(2). These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits.

In our opinion, such schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

/S/ KPMG PEAT MARWICK

Chicago, Illinois
February 11, 1994

<PAGE>

Schedule VIII

SPIEGEL, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
($000s omitted)

Year Ended December 31,

1993 1992 1991
----------- ------------ -----------
<S> <C> <C> <C>
ACCOUNTS RECEIVABLE VALUATION ACCOUNTS:

Allowance for doubtful accounts

Balance at beginning of year $ 37,231 $ 50,776 $ 52,230

Charged to earnings 69,160 48,802 64,252

Reduction for receivables sold (1,609) (4,294) (3,975)

Other (1) 695 _ _

Accounts written off, net of
recoveries (58,622) (58,053) (61,731)
----------- ------------ -----------
Balance at end of year $ 46,855 $ 37,231 $ 50,776
=========== ============ ===========

ALLOWANCE FOR RETURNS:

Balance at beginning of year $ 23,960 $ 21,936 $ 29,961

Charged to earnings 259,111 242,745 238,103

Amounts written off (254,833) (240,721) (246,128)
----------- ------------ -----------
Balance at end of year $ 28,238 $ 23,960 $ 21,936
=========== ============ ===========

<FN>

(1) Other represents the beginning balance of New Hampton which was acquired
in 1993.

</TABLE>

<PAGE>
Schedule X

SPIEGEL, INC. AND SUBSIDIARIES

SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
($000s omitted)

Year Ended December 31,

1993 1992 1991
---------- ---------- ---------

<S> <C> <C> <C>
Advertising (excluding
catalog costs $48,150 $36,851 $34,146

</TABLE>

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Spiegel, Inc., has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, on
March 29, 1994.
SPIEGEL, INC.

By: /S/ JOHN J. SHEA
John J. Shea, President and
Chief Executive Officer
(Principal Operating Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Spiegel, Inc., and
in the capacities indicated on March 29, 1994.

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

/S/ JOHN J. SHEA Vice Chairman, President, Chief Executive
John J. Shea Officer and Director (Principal Operating
Executive Officer)

/S/ JAMES W. SIEVERS Chief Financial Officer and Vice
James W. Sievers President-Finance (Principal Financial and
Accounting Officer)

/S/ KENNETH A. BOCHENSKI Director
Kenneth A. Bochenski

/S/ JAY A. LIPE Director
Jay A. Lipe

/S/ DAVID C. MOON Director
David C. Moon

/S/ THOMAS BOHLMANN Director
Thomas Bohlmann

/S/ HORST R. HANSEN Director
Horst R. Hansen

/S/ DR. PETER MULLER Director
Dr. Peter Muller

<PAGE>
EXHIBIT 21

SPIEGEL, INC.

Listing of Subsidiaries
December 31, 1993

Name of Corporation Incorporated In
- ----------------------------------------------- -----------------

BWS Credit Services, Inc. Delaware

Cara Corporation Illinois

Catalog 1, Inc. Delaware

Distribution Fulfillment Services, Inc. Delaware

Eddie Bauer, Inc. Delaware

Eddie Bauer International, Inc. (1) Delaware

Equity Cash Benefit Insurance Agency, Inc. Illinois

Equity Cash Benefit Insurance Agency, Inc. Nevada

First Consumers National Bank Federal Charter

For You, Inc. Delaware

Hampton Realty Acquisition Corporation (3) Delaware

Honeybee, Inc. Delaware

Honeybee By Mail, Inc. (2) Pennsylvania

Kids Stores, Inc. Delaware

New Hampton, Inc. Delaware

Spiegel Acceptance Corporation Delaware

Spiegel Credit Corporation Delaware

Spiegel Credit Corporation II Delaware

Spiegel of Canada International General Canada
Merchandise, Inc. (1)

Spiegel Management Group, Inc. Delaware

Spiegel of Philadelphia, Inc. Pennsylvania

Spiegel Properties Inc. Delaware

Spiegel Publishing Company Illinois

Spiegel Teleservice, Inc. Illinois

Spiegel Teleservice, Inc. Nevada

Together Retail U.S.A., Inc. Delaware

Ultimate Outlet Inc. Delaware

(1) Wholly-owned subsidiary of Eddie Bauer, Inc., a wholly-owned subsidiary of
Spiegel, Inc.

(2) Wholly-owned subsidiary of Honeybee, Inc., a wholly-owned subsidiary of
Spiegel, Inc.

(3) Wholly-owned subsidiary of New Hampton, Inc., a wholly-owned subsidiary
of Spiegel, Inc.

<PAGE>

EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Spiegel, Inc.:

We consent to incorporation by reference in the registration statements No.
33-19663, 33-32385, 33-38478, 33-44780, 33-56200 and 33-51755 on Form S-8 of
Spiegel, Inc. of our report dated February 11, 1994, relating to the
consolidated balance sheets of Spiegel, Inc., and subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements of earnings,
stockholders' equity, and cash flows and related schedules for each of the years
in the three-year period ended December 31, 1993, which reports appear in the
December 31, 1993 annual report on Form 10-K of Spiegel, Inc.

/S/ KPMG PEAT MARWICK

Chicago, Illinois
March 29, 1994