JACOBSON STORES INC, 10-K405, 1999-04-14

JACOBSON STORES INC
10-K405, 1999-04-14
DEPARTMENT STORES

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FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 30, 1999

Commission File No. 0-6319

JACOBSON STORES INC.
- -----------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Michigan 38-0686330
- -----------------------------------------------------------------------------
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)

3333 Sargent Road, Jackson, Michigan 49201-8847
- -----------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

Registrant's telephone number, including area code: 517-764-6400

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

None

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

Common Stock, $1 par value
Series A Preferred Stock Purchase Rights
6 3/4% Convertible Subordinated Debentures due 2011

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]

STATE THE AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING COMMON EQUITY
HELD BY NON-AFFILIATES COMPUTED BY REFERENCE TO THE PRICE AT WHICH THE COMMON
EQUITY WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF SUCH COMMON EQUITY,
AS OF A SPECIFIED DATE WITHIN THE PAST 60 DAYS.

$25,668,000 as of March 1, 1999

(THE PERSONS CONSIDERED AFFILIATES FOR THE PURPOSE OF THE FOREGOING
COMPUTATION ARE IDENTIFIED ON PAGE 21 OF THIS REPORT.)

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

Common Stock, $1 par value: 5,788,209 2/3 shares outstanding
as of March 1, 1999

DOCUMENTS INCORPORATED BY REFERENCE

LIST HEREUNDER THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE
PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED:

SPECIFIED PORTIONS OF PROXY STATEMENT FOR 1999 ANNUAL MEETING OF
SHAREHOLDERS, TO BE HELD MAY 27, 1999: PART III

<PAGE>

JACOBSON STORES INC.
FORM 10-K
FISCAL YEAR ENDED JANUARY 30, 1999

INDEX
Page
----
PART I.

Item 1. Business. 1

Item 2. Properties. 7

Item 3. Legal Proceedings. 9

Item 4. Submission of Matters to a Vote of Security Holders. 9

Executive Officers of the Registrant. 10

PART II.

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. 12

Item 6. Selected Financial Data. 13

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13

Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 20

Item 8. Financial Statements and Supplementary Data. 20

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 20

PART III.

Item 10. Directors and Executive Officers of the Registrant. 21

Item 11. Executive Compensation. 21

Item 12. Security Ownership of Certain Beneficial Owners and
Management. 21

Item 13. Certain Relationships and Related Transactions. 21

PART IV.

Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K. 22

SIGNATURES 27

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1/F-20

FINANCIAL STATEMENT SCHEDULES S-1

INDEX OF EXHIBITS E-1/E-3

<PAGE>

PART I

ITEM 1. BUSINESS.

INTRODUCTION

The registrant, Jacobson Stores Inc., a Michigan corporation and
successor to a business founded in 1868, operates specialty stores catering
to discerning customers with preferences for distinctive, quality
merchandise. The Company is committed to highly responsive service,
distinctive merchandise of high quality at a fair price, and a visually
appealing and immaculate setting. Each store features fashion apparel and
accessories for the family, and most offer decorative accents for the home.

The Company owns a substantial portion of the real property used in
its business, primarily through its consolidated, wholly-owned real estate
subsidiary, Jacobson Stores Realty Company ("Jacobson Realty"). The Company
also has a consolidated, wholly-owned finance subsidiary, Jacobson Credit
Corp. ("Jacobson Credit"). As used in this report, the terms "registrant",
"Company" and "Jacobson's" refer to Jacobson Stores Inc. and its subsidiaries
unless the context indicates otherwise.

The Company has stores in twenty-four cities in Michigan, Indiana,
Kansas, Kentucky, Ohio and Florida. The principal distribution functions are
performed at service centers in Jackson, Michigan and Winter Park, Florida.
Functions common to all stores, such as management coordination,
merchandising, sales promotion, data processing and accounting, are
centralized at the corporate headquarters in Jackson, Michigan.

MERCHANDISE AND MARKETING

Merchandise. Jacobson's is a specialty store offering fashion
leadership tailored to discerning, fashion-oriented customers through
distinctive, quality merchandise. Stores are merchandised with fashion
apparel and accessories for women, men, and children, and most offer
decorative accents for the home.

<PAGE>

The percentage contribution to sales by major class of merchandise
for the last three fiscal years was as follows:

Year Ended
-----------------------------
January January January
1999 1998 1997
------- ------- -------

Women's apparel and accessories .. 66.0% 66.7% 67.2%

Men's apparel and accessories .... 13.5 13.6 13.3

Accessories for the home ......... 9.3 8.2 7.8

Children's apparel and accessories 7.9 7.7 7.6

Miscellaneous .................... 3.3 3.8 4.1
----- ----- -----

100.0% 100.0% 100.0%
===== ===== =====

Personal Service. Jacobson's stores are fully staffed with
knowledgeable sales associates to ensure that customers receive highly
responsive service. Jacobson's sales associates are experienced and
well-trained through video presentations, seminars and close working
relationships with buyers and merchandise managers. Sales associates maintain
personal trade lists of their customers' sizes, colors, fashion preferences,
and important dates, and contact customers by telephone or personal note to
alert them to the arrival of new merchandise or to remind them of birthdays
or anniversaries. Management believes that personal relationships between
sales associates and their clientele promote customer loyalty and contribute
to the Company's growth. Jacobson's has a liberal return policy and accepts
merchandise purchased at Jacobson's for return or exchange if the customer is
not satisfied. Other special services include free gift wrapping and free
parking. All Jacobson's sales associates are compensated on some form of
commission program.

Sales Promotion. The Company principally uses newspaper and direct
mail, as well as in-store events and billing statement enclosures, to
stimulate sales. Advertising generally focuses on current fashions and
merchandise classifications. The Company's policy is to price merchandise
fairly and competitively and to limit its use of sale events to selected
special promotions and seasonal clearances. Management believes that its
pricing practices enhance credibility and customer loyalty. Jacobson's
in-store events include fashion shows and wardrobing seminars to communicate
fashion trends to customers.

Store Design. Jacobson's stores are designed to project an
attractive, comfortable atmosphere. All aspects of the store interiors and
fixturing are coordinated by the Company's store planning personnel, using
quality fixtures, carpeting, lighting and displays.

<PAGE>

CREDIT POLICY

Jacobson's issues its own credit card as a customer service. The
Company offers two credit plans to its cardholders: an Option plan requiring
a minimum monthly payment of 20% of the outstanding balance; and an Extended
Payment plan available for purchases of furs, fine jewelry, china, crystal,
silver and furniture in the Company's one store which carries furniture.
Purchases charged under the Extended Payment plan and purchases of coats,
furs and children's outerwear charged under the Option plan are eligible for
90 days deferred billing.

Sales under Jacobson's credit plans averaged 39.4% of sales for the
last three fiscal years and accounted for 35.7% of the Company's sales in
fiscal 1998. In addition, sales under third party credit cards (VISA,
MasterCard and American Express) averaged 44.4% of sales for the last three
fiscal years and accounted for 47.9% of the Company's sales in fiscal 1998.
Beginning in 1999, Jacobson's will also accept the Discover Card. Accounts
written off, net of recoveries, have averaged 0.6% of credit sales over the
last three years and totalled 0.6% of credit sales in 1998.

The Company maintains purchasing history on its 210,000 active
Jacobson's card holders as well as on third party charge customers, which
permits targeting of direct mail advertising and automatic increases in
credit limits of its cardholders.

OPERATIONS

The principal distribution services for its stores are performed at
regional service centers in Jackson, Michigan and Winter Park, Florida.
Functions common to all stores, such as management coordination,
merchandising, sales promotion, data processing and accounting, are
centralized at the corporate headquarters in Jackson, Michigan.

Jacobson's stores in Michigan are located in Birmingham, Grosse
Pointe, Livonia and Rochester (all suburbs of Detroit), Ann Arbor, East Grand
Rapids, East Lansing and Saginaw; in Indianapolis, Indiana; in Leawood,
Kansas; in Louisville, Kentucky; in Columbus and Toledo, Ohio; and in
Florida, in Boca Raton, Clearwater, Fort Myers, Jacksonville, Longwood,
Naples, North Palm Beach, Osprey, Sarasota, Tampa and Winter Park. Stores in
the Midwest range from 101,000 to 199,000 square feet. The Florida stores
range from 23,000 to 90,000 square feet.

<PAGE>

Jacobson's stores are generally open seven days each week for 71
hours.

Annual sales, percentage increase in sales, average gross square
footage of stores in operation during the fiscal year, and approximate sales
per average gross square foot were as follows:

<TABLE>
<CAPTION>
Year Ended
----------------------------------------
January January January
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net sales (in thousands) ...................... $ 444,305 $ 447,471 $ 432,469
Percentage increase (decreases) in sales:
All stores ................................. (0.7)% 3.5% 4.4%
Comparable stores .......................... 1.1 7.3% (1.5)%
Average gross square footage (in thousands) ... 2,356 2,387 2,658
Approximate sales per average gross square foot 189 187 163
</TABLE>

PURCHASING, CONTROL AND DISTRIBUTION OF INVENTORY

Jacobson's purchases merchandise from several thousand suppliers, no
one of which accounted for as much as 6.0% of the Company's net purchases
during fiscal 1998. Merchandising decisions are directed by a general
merchandise manager, 9 divisional merchandise managers and 56 buyers and
divisional sales managers. In addition, the Company is a member of the
Frederick Atkins Buying Office, a domestic and foreign buying office serving
13 retailers, which provides merchandising counsel, product information,
direct store import capability, and other services.

An on-line computerized merchandise information system provides the
Company's buyers with detailed reports of current sales and inventory levels
for each store, by department, class, vendor, style, color and size. This
system permits the Company's merchandising staff to analyze trends on a daily
basis, to identify fast-selling and slow-selling merchandise and to respond
to customer buying preferences when making reorder and markdown decisions.

Merchandise is generally shipped directly from vendors to the
Company's regional service centers in Jackson, Michigan and in Winter Park,
Florida, where it is inspected for quality, priced and shipped to the stores
by Jacobson's fleet of trucks.

Jacobson's adopted the LIFO method of inventory valuation in 1968.
At the end of fiscal 1998, LIFO reserves totalled $17,809,000, or
approximately 16.4% of pre-LIFO inventory values. Physical inventories are
taken once each year. Inventory shrinkage at retail over the past three
fiscal years has averaged 1.4% of retail sales.

<PAGE>

EXPANSION AND CONSOLIDATION

The Company has no commitments for any new store locations at the
present time. The Company reviews the performance of its less profitable
existing stores from time to time to determine whether it would be in the
Company's best interest to close any of these stores. Store closings could
have a significant impact on the Company's sales, expenses and capital
requirements and would likely entail significant one time charges to effect
the closing and to recognize any impairment of assets resulting from the
closing decision.

REAL ESTATE POLICY

Jacobson's owns or has long-term leases of the real estate used in
the operation of its business. The Company owns 66.8% of the total square
footage used in its business. The Company maintains a continuing program of
property improvements and renewal of existing stores and support facilities.
At January 30, 1999, mortgage loans and related secured financings comprised
38.4% of consolidated debt.

COMPETITION

The specialty store business is highly competitive. The Company's
stores are in active competition with other department and specialty stores
and with regional and national department store chains, some of which are
considerably larger than the Company and have substantially greater financial
and other resources. Jacobson's competes principally on the basis of
availability of fashion merchandise, quality, personalized service and
attractive store surroundings, as well as fair pricing and advertising. The
Company believes it is a respected retail merchandiser in the communities it
serves, and that its merchandising policies and reputation enable it to
maintain its competitive position.

<PAGE>

ASSOCIATES

Due to its commitment to highly responsive customer service,
Jacobson's believes that its associates are among its key resources. The
Company emphasizes development programs for associates and promotion from
within. The Company employs approximately 4,400 associates, 3,300 full-time
and 1,100 part-time. During the holiday season, the number of associates
increases to approximately 5,000.

(a) GENERAL DEVELOPMENT OF BUSINESS.

In 1997, the Company sold its Store for the Home in Grosse
Pointe, Michigan. In July 1998, the Company consolidated its home store
operations in its existing Apparel store in Grosse Pointe.

In May 1998, Herman J. Heinle, Senior Vice President-General
Merchandise Manager, resigned. In July 1998, George P. Kelly was hired in the
same position. Mr. Kelly's position was eliminated, effective March 29, 1999.

On August 27, 1998, the Board of Directors declared a
dividend of one Series A Preferred Stock Purchase Right on each Common Share
outstanding. The dividend was payable to shareholders of record on October
25, 1998, and is payable with respect to certain common shares issued
thereafter. The Company also adopted a Rights Agreement, effective October
25, 1998, to replace an expiring Rights Plan, pursuant to which the Rights
are issued. Each Right, when it becomes exercisable, entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Preferred Stock at an exercise price of $100, subject to adjustment. The
Company has reserved 100,000 shares of Series A Preferred Stock for issuance
on the exercise of the Rights. The Rights trade with the Company's Common
Shares until they become exercisable, which occurs on the date of public
announcement that any person or group has acquired, or 10 days (or such later
date as the Board of Directors may determine) after the commencement of, or
public announcement of an intention to commence, an offer to acquire
beneficial ownership of 20% or more of the Company's Common Shares (subject
to certain exceptions, including an offer to buy all shares that is approved
by the Company's disinterested directors). After the Rights become
exercisable, each Right (except those of the acquiring person or group) will
entitle the holder to purchase upon exercise of the Right, at the then
current exercise price of the Right, Company Common Shares having an average
market value of twice the current exercise price of the Right. Alternatively,
if the Company is acquired in a merger or other business combination or if
more than 50% of its assets or earning power are sold to an acquiring person
or in a transaction in which all holders of Common Shares are not treated
alike, each Right (except those of the acquiring person or group) will
entitle the holder to purchase, upon exercise, at the then current exercise
price of the Right, common shares of the acquiring company having an average
market value of twice the current exercise price of the Right. The Rights may
be redeemed by the Company for one cent per Right prior to the date a person
or group acquires 20% or more of the Company's Common Shares, and will expire
on October 25, 2008, unless extended or earlier redeemed by the Board of
Directors.

<PAGE>

(b) INDUSTRY SEGMENTS AND LINES OF BUSINESS.

Jacobson's operates in a single industry, the specialty store
industry.

The percentage contribution to sales by major class of
merchandise for each of the last three fiscal years is set forth on page 2 of
this report.

The nature of Jacobson's business, the categories of
merchandise it sells, and the percentage contribution to sales by merchandise
category during the past three fiscal years, are set forth on pages 1-6 of
this report.

The specialty store business is seasonal. The holiday season
(from the day after Thanksgiving to January 1) generally accounts for 15-20%
of Jacobson's net sales.

By reason of the seasonal nature of the business, Jacobson's
and others in the industry experience significant build-up of inventory and
accounts receivable at certain times of the year. To support the seasonal
requirements, the Company has a revolving credit line currently permitting
borrowings of up to $80,000,000 (which the Company may increase to up to
$100,000,000), subject to a borrowing base limitation and lender reserves.
Further information on this line of credit is set forth in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" on page 16 and in the Notes to
the Company's Consolidated Financial Statements for the three fiscal years
ended January 1999, filed as part of this report (see "Financing" on page
F-11).

Competitive conditions in the specialty store business are
discussed on page 5 of this report.

Information with respect to the Company's associates is
provided on page 6 of this report.

(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES.

The registrant has no foreign operations and no material
export sales.

ITEM 2. PROPERTIES.

The following table shows the location and approximate size of
Jacobson's stores and its offices and principal warehouse and distribution
facilities; whether owned by the registrant or leased; and the expiration
dates (including renewal options) of principal real estate leases. The
majority of owned properties is subject to mortgages.

<PAGE>

Jacobson's management considers that these properties, as well as
its furniture, fixtures, machinery and equipment, are well maintained,
suitable and adequate for their intended purposes, and in general fully
utilized.

<TABLE>
<CAPTION>
Approximate Expiration
Total Square Dates of
Feet of Principal
Locations Building(s) Ownership Leases
--------- ------------ --------- ----------
<S> <C> <C> <C>
MICHIGAN
Ann Arbor......................... 101,000 Owned ----
East Lansing...................... 117,000 Partly owned (1) 2028
Saginaw........................... 199,000 Partly owned (2) 1998
Grosse Pointe..................... 120,000 Owned ----
Birmingham........................ 179,000 Owned ----
East Grand Rapids................. 148,000 Owned ----
Rochester......................... 106,000 Partly owned (3) 2046
Livonia........................... 150,000 Owned ----
Corporate Headquarters and Regional
Service Center
(Jackson)...................... 238,000 Owned ----

INDIANA
Indianapolis...................... 120,000 Leased 2048

KANSAS
Leawood........................... 120,000 Leased 2051

KENTUCKY
Louisville........................ 161,000 Leased 2036

OHIO
Toledo............................ 120,000 Owned ----
Columbus.......................... 119,000 Partly owned (4) 2079

FLORIDA
Sarasota.......................... 27,000 Partly owned (4) 2014
Winter Park....................... 23,000 Leased 2013
Longwood.......................... 49,000 Leased 2020
North Palm Beach.................. 90,000 Leased 2022
Osprey............................ 32,000 Leased 2025
Clearwater........................ 52,000 Leased 2039
Fort Myers........................ 51,000 Partly owned (5) 2085
Jacksonville...................... 82,000 Owned ----
Tampa............................. 48,000 Leased 2030
Naples............................ 46,000 Leased 2042
Boca Raton........................ 80,000 Leased 2052
Regional Service Center
(Winter Park).................. 84,000 Owned ----
<FN>

<PAGE>

(1) Building is owned; approximately half of land is owned and
half leased.

(2) Approximately 29,000 square feet leased from month to month;
balance owned.

(3) Approximately 71,000 square feet and related parking area are
owned. The balance of the shopping center is leased, of which
35,000 square feet are operated as part of Jacobson's store.

(4) Building is owned on leased land.

(5) Building is owned; land and parking area are leased.
</TABLE>

ITEM 3. LEGAL PROCEEDINGS.

(a) No material legal proceedings are pending to which Jacobson
Stores Inc. or any of its subsidiaries is a party or to which any of their
property is subject, other than ordinary routine litigation incidental to the
registrant's business, and no such proceeding is known by the registrant to
be contemplated.

(b) Not applicable.

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

Not applicable.

<PAGE>

EXECUTIVE OFFICERS OF THE REGISTRANT.

The table below sets forth the name and age of each executive
officer of the registrant, all positions and offices with Jacobson Stores
Inc. and its wholly-owned subsidiaries held by each such person, and the
period during which the officer has served in such positions. Each has been
elected to hold office until the 2000 Annual Meeting of the Board of
Directors (except in the case of retirement or other termination of
employment) or until a successor is elected and qualified.

Held
Office
Name Age Positions and Offices Since
---- --- --------------------- -----

P. Gerald Mills 70 Chairman of the Board, President, 1996
Chief Executive Officer, and
Director Jacobson Stores Inc. and
wholly-owned subsidiaries

Paul W. Gilbert 54 Vice Chairman of the Board, and 1993
Director, Jacobson Stores Inc. and
wholly-owned subsidiaries

James A. Rodefeld 60 Executive Vice President-Marketing & 1997
Stores, Jacobson Stores Inc.

Theodore R. Kolman 58 Senior Vice President- 1991
General Merchandise Manager,
Jacobson Stores Inc.

Beverly A. Rice 65 Senior Vice President-Fashion & 1997
Merchandising Strategy, Jacobson
Stores Inc.

Timothy J. Spalding 43 Vice President-Controller, 1991
Jacobson Stores Inc. and
wholly-owned subsidiaries

There is no arrangement or understanding between any of the officers
and any other person pursuant to which the officer was selected as an
officer, except that each of the executive officers is party to an employment
agreement with the Company pursuant to which he or she is required to be
elected to the offices with the Company he currently holds, or such other
capacity as the Board of Directors, or the Chief Executive Officer, as
applicable, deems advisable.

Each executive officer except Mr. Mills, Ms. Rice and Mr. Rodefeld
has held managerial or executive positions with Jacobson's for more than five
years.

<PAGE>

P. Gerald Mills has served as Chairman of the Board and Chief
Executive Officer of the Company since October 1996, and also as President of
the Company since December 1996. Mr. Mills was Chairman and Chief Executive
Officer of Dayton Corporation, 1978-1981; Chairman and Chief Executive
Officer, the J. L. Hudson Company, 1981-1983; Chairman and Chief Executive
Officer, Dayton Hudson Department Store Company and Executive Vice President,
Dayton Hudson Corporation, 1983-1985; Chairman and Chief Executive Officer,
Millston Corporation, a specialty store retailer, 1986-1992; and was
self-employed as a business consultant from 1992-1996.

Paul W. Gilbert has been Vice Chairman of the Board of the Company
since 1993. Mr. Gilbert was Vice President and Controller of the Company,
1976-1984, Senior Vice President and Chief Financial Officer, 1984-1988,
Executive Vice President and Chief Financial Officer 1988-1993, and Treasurer
1991-1993.

James A. Rodefeld has been Executive Vice President-Marketing &
Stores since November 1997. Mr. Rodefeld was Chief Executive Officer,
Sycamore Stores, Inc., 1987-1992, was self-employed as a business consultant,
1992-1997, and Senior Vice President-Marketing of the Company, January to
November, 1997.

Theodore R. Kolman has been Senior Vice President-General
Merchandise Manager of the Company since 1991.

Beverly A. Rice has been Senior Vice President-Fashion and
Merchandising Strategy of the Company since January 1997. Ms. Rice was Vice
President, General Manager, N. Theobald, Inc., a specialties gift and home
store, 1988-1995, from which she retired.

Timothy J. Spalding has been Vice President-Controller since 1991.

<PAGE>

PART II

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

The Company's Common Stock is traded on The Nasdaq National Market
tier of The Nasdaq Stock Market, under the symbol "JCBS."

The quarterly range of high and low sales price quotations of
Jacobson's Common Stock for each quarter of fiscal 1998 and 1997 are shown in
the following schedule:

Year Quarter High Low
---- ------- ---- ---

1998 4th $ 9 3/4 $ 5 3/4
3rd 13 3/4 6 1/2
2nd 15 3/8 13
1st 15 3/4 12 5/8

1997 4th $ 13 3/4 $ 10 1/2
3rd 13 1/4 7 7/8
2nd 10 3/8 7 3/8
1st 9 1/2 7 1/8

The approximate number of shareholders of record of Jacobson's
Common Stock as of March 1, 1999 was 1,250.

No dividends were paid in either of 1998 or 1997. The Company's
revolving credit loan facility limits cash dividends to 50.0% of net income
for the immediately preceding fiscal year, subject to a maximum of $.50 per
outstanding share per year and borrowing availability restrictions.

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.

Selected financial data for fiscal 1994 through 1998 is as follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(in thousands except
per share data) 1998 1997(1) 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales, including leased
departments .............. $444,305 $447,471 $432,469 $414,267 $409,154
Earnings (loss) before income
taxes .................... 2,515 1,905 (17,289) (6,541) 6,388
Net earnings (loss) ......... 1,635 1,214 (11,462) (4,206) 4,088
Total assets ................ 236,875 233,279 260,418 262,514 268,589
Long-term debt, less current
portion .................. 99,803 104,138 130,147 119,727 120,424

Per common share:
Net earnings (loss) -
Basic and Diluted ..... $ 0.28 $ 0.21 $ (1.98) $ (0.73) $ 0.71
Cash dividends ........... -- -- 0.37 1/2 0.50 0.50
<FN>
(1) 53 week year
</TABLE>

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

RESULTS OF OPERATIONS

The following table shows the percentage relationship to sales of the items
presented for the periods indicated.

- -------------------------------------------------------------------------
1998 1997(1) 1996
- -------------------------------------------------------------------------

Net sales .................................. 100.0% 100.0% 100.0%
Gross profit ............................... 33.6 32.7 32.1
Selling, general and administrative expenses 31.3 31.0 32.9
Interest expense, net ...................... 1.8 2.1 2.2
Store closing costs (credit) ............... -- (0.1) 1.0
Gain on sale of property ................... (0.1) (0.7) --
Earnings (loss) before income taxes ........ 0.6 0.4 (4.0)
Net earnings (loss) ........................ 0.4 0.3 (2.7)

(1) 53 week year.

<PAGE>

1998 versus 1997

Sales in 1998 totalled $444,305,000, a decrease of 0.7% from 1997.
Comparable store sales increased 1.1%. The 1997 fiscal year included 53
weeks. On an equivalent 52 week basis, total sales increased 0.9% and
comparable store sales increased 2.7%. The overall 1998 sales decrease was
attributable to the extra week in 1997 and sales of stores closed in 1997.

Women's apparel and accessories represented 66.0% of the Company's
total business in 1998. Other major components were men's 13.5%, children's
7.9%, home accessories 9.3%, and miscellaneous 3.3%.

The Company's gross profit percentage increased to 33.6% in 1998
from 32.7% in 1997, due primarily to a LIFO credit which reduced cost of
goods sold by $824,000 in 1998 compared to a LIFO provision of $1,553,000 in
1997, and to higher maintained markup and lower markdowns.

Selling, general and administrative expenses increased to 31.3% of
sales in 1998 from 31.0% in 1997. The increase is due primarily to higher
sales promotion expense, partially offset by reduced benefit expense (pension
and health care).

Interest expense totalled 1.8% of sales in 1998 compared with 2.1%
in 1997, reflecting principally lower average borrowings and rates on the
revolving credit facility and reduced interest on other debt as the result of
scheduled debt maturities.

The Company established a $4,200,000 reserve in 1996 in connection
with the closing of three under-performing stores in March 1997. In 1997, the
Company recognized a $340,000 pre-tax credit to write-off the remaining
severance and benefit reserves after all payments were made and to adjust the
property and equipment reserve after sale of a portion of the related
property at greater than the original estimated value.

In 1998, the Company sold properties in Jackson and Kalamazoo,
Michigan, at a combined pre-tax gain of $617,000. In 1997, the Company
realized pre-tax gains on sales of property totalling $2,987,000, including
the sale of its Grosse Pointe Store for the Home and immaterial gains on the
sale of two non-operating properties.

1998 net earnings totalled $1,635,000, or 28 cents per common share,
compared with 1997 earnings of $1,214,000, or 21 cents per share. As a
percentage of sales, net earnings were 0.4% in 1998 and 0.3% in 1997. 1998
results included after-tax gains on sales of property totalling $407,000, or
7 cents per common share. 1997 results included after-tax gains on sales of
property and store closing reserve credits totalling $2,196,000, or 38 cents
per common share.

<PAGE>
1997 versus 1996

Sales in 1997 totalled $447,471,000, an increase of 3.5% from 1996.
Comparable store sales increased 7.3%. The 1997 fiscal year included 53
weeks. On an equivalent 52 week basis, the total sales gain was 1.8% and
comparable store sales increased 5.6%. The overall 1997 sales increase
reflects the increase in comparable store sales, the first full year impact
of new stores in Leawood, Kansas, and Boca Raton, Florida, opened in March
and November 1996, respectively, and the extra week in 1997, partially offset
by the closing of three underperforming stores in March 1997.

Women's apparel and accessories represented 66.7% of the Company's
total business in 1997. Other major components were men's 13.6%, children's
7.7%, home accessories 8.2% and miscellaneous 3.8%.

The Company's gross profit percentage increased to 32.7% in 1997
from 32.1% in 1996, due primarily to reduced inventory shortage and
elimination of incentive discounts offered to new charge customers in 1996,
partially offset by a higher LIFO provision which increased cost of goods
sold by $1,553,000 in 1997 compared to $268,000 in 1996.

Selling, general and administrative expenses decreased to 31.0% of
sales in 1997 from 32.9% in 1996. The decrease is due primarily to expense
leverage resulting from increased sales, Company-wide expense reduction
initiatives and severance obligations in 1996 associated with changes of
senior management, partially offset by higher sales promotion expense.

Interest expense totalled 2.1% of sales in 1997 compared with 2.2%
in 1996.

In 1997, the Company realized pre-tax gains on sales of property
totalling $2,987,000, including the sale of its Grosse Pointe, Michigan,
Store for the Home and immaterial gains on the sale of two non-operating
properties.

1997 net earnings totalled $1,214,000, or 21 cents per common share,
compared with a 1996 net loss of $11,462,000, or $1.98 per share. As a
percentage of sales, net earnings were 0.3% in 1997 and the 1996 net loss was
2.7%. 1997 results included after-tax gains on sales of property and store
closing reserve credits totalling $2,196,000, or 38 cents per common share.
1996 results included after-tax store closing costs and severance obligations
totalling $3,713,000, or 64 cents per share.

<PAGE>

INFLATION

The Company cannot determine the precise effects of inflation on its
business. Because of inflation, historically the Company has experienced
increases in the cost of merchandise and in certain operating expenses. The
Company generally has been able to offset the effects of these increased
expenses by adjusting prices, by using the LIFO method for valuing all
merchandise inventories and by controlling expenses. The Company's ability to
adjust prices is limited by competitive pressures in its market areas. The
Department Store Inventory Price Indexes, published by the Bureau of Labor
Statistics (BLS), are used to measure inflation's impact on inventories in
the LIFO valuation. The BLS Index decreased 1.5% in 1998 and 0.5% in 1997,
and increased 0.9% in 1996.

LIQUIDITY AND CAPITAL RESOURCES

At January 30, 1999, the Company's current ratio was 2.37 to 1 and
working capital totalled $76,094,000, including $2,929,000 of cash and cash
equivalents. At January 31, 1998, the Company's current ratio was 2.57 to 1
and working capital totalled $78,815,000, including $3,883,000 of cash and
cash equivalents. At January 25, 1997, the Company's current ratio was 2.81
to 1 and working capital totalled $96,053,000, including $4,871,000 of cash
and cash equivalents.

The Company uses cash flows from operations and revolving credit
line borrowings to fund its seasonal working capital needs, debt service and
expenditures to modernize and refixture existing stores. To support its
present and planned working capital requirements, the Company has a
$100,000,000 revolving credit facility under a Revolving Credit Agreement
with a commercial lender. The revolving credit facility currently provides
for borrowings of up to $80,000,000, subject to a borrowing base limitation
and lender reserves. The Company may, at its option, increase the maximum
available borrowings under the revolving credit facility to up to
$100,000,000 in the aggregate, subject to the borrowing base limitation and
lender reserves. Loans under the facility bear interest at either or both of
two variable interest rate alternatives as chosen by the Company. One of the
interest rates may decrease if the Company meets specified performance
measures, which were not met in 1998. The facility also permits up to
$5,000,000 in letters of credit, which decrease the amount available for
loans.

Borrowings under the revolving credit facility mature on March 24,
2001. Each year, beginning in 1999, the Company may request a one-year
extension of the maturity date, subject to lender approval. Any party may
terminate the facility as of the maturity date by giving 90 days notice. The
Company may also terminate the facility early on 90 days notice if it pays a
termination fee equal to one-half of one percent a year (for what would have
been the remaining term of the facility) of the average daily balance of
loans and letters of credit under the facility since its inception. The
facility carries a line of credit fee equal to one-quarter of one percent a
year of the excess of the aggregate commitments under the facility (currently
$80,000,000) over the amount of loans and letters of credit outstanding and
an agent's fee equal to $45,000 a year. Borrowings under the facility are
guaranteed by the Company's subsidiaries and secured by accounts receivable,
inventory and related intangible assets and the proceeds thereof of the
Company and its subsidiaries.

The revolving credit facility limits cash dividends to 50 percent of
net income for the immediately preceding fiscal year, subject to a maximum of
$.50 per outstanding share per year and borrowing availability restrictions.
At January 30, 1999, the Company had borrowed $34,875,000 under this facility
at an interest rate of 7.4% and had $45,125,000 of borrowing availability
under the borrowing base calculated as of that date.

<PAGE>

A part of the Company's financial strategy is to own, or obtain
long-term leases on, its properties. Capital expenditures to modernize and
refixture existing stores and support facilities generally are financed with
internally generated funds. Any new stores and major expansion projects
generally are financed by first mortgages or comparable financing through the
Company's consolidated, wholly-owned real estate subsidiary, Jacobson Stores
Realty Company, or through long-term leases.

The table below provides information about the Company's debt
obligations that are sensitive to changes in interest rates. The Company's
fixed rate debt obligations include 6 3/4% Convertible Subordinated
Debentures due 2011, mortgage notes, collateral trust bonds and obligations
under capital leases. Variable rate obligations include borrowings under the
revolving credit facility and industrial development revenue bond
obligations. For these debt obligations, the table presents scheduled
principal maturities of long-term debt and related weighted average interest
rates for each of the next five years, aggregate subsequent maturities and
market value of debt at January 30, 1999. Average interest rates are based on
contractual rates for fixed rate obligations and current rates for variable
rate obligations. Dollars are in thousands:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Fixed Rate Obligations Variable Rate Obligations
------------------------- --------------------------
Average Amount Average Amount
Scheduled Maturity Date Maturing Interest Rate Maturing Interest Rate
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999....................... $ 3,377 7.4% $ 342 3.9%
2000....................... 3,869 7.3 316 3.7
2001....................... 12,626 7.8 35,193 7.4
2002....................... 3,268 7.1 318 3.7
2003....................... 8,007 7.8 420 3.7
Thereafter................. 28,632 6.8 7,154 3.7
---------- --- --------- ---
Total debt maturities...... $ 59,779 7.2% $ 43,743 6.7%
========== === ========== ===
Market value of debt at
January 30, 1999......... $ 55,900 $ 43,700
========== ==========
</TABLE>

CASH FLOWS

Cash and cash equivalents decreased $954,000 in 1998 and $988,000 in
1997, and increased $1,803,000 in 1996. Cash flows are impacted by operating,
investing and financing activities. In 1998, operating activities provided
$12,254,000 of cash compared to $24,518,000 provided in 1997 and $292,000
used in 1996. The decrease in 1998 compared to 1997 reflects primarily cash
generated from store closings in 1997, partially offset by increased earnings
in 1998, a greater increase in accounts payable in 1998 and payments against
store closing reserves in 1997. The increase in 1997 compared to 1996
reflects primarily the improved earnings performance, cash generated from
store closings in 1997, and cash used in 1996 for the start-up inventory for
new stores in Leawood, Kansas and Boca Raton, Florida. These changes were
partially offset by reduced merchandise payables.

<PAGE>

Investing activities used cash of $8,721,000 in 1998, provided cash
of $881,000 in 1997 and used cash of $5,832,000 in 1996. Investing activities
included capital expenditures for new stores in 1996, and modernization and
refixturing of existing stores and support facilities totalling $10,095,000,
$4,114,000 and $5,590,000 in 1998, 1997 and 1996, respectively. Proceeds from
sales of property totalled $1,001,000 and $4,068,000 in 1998 and 1997,
respectively. There were no property sales in 1996. In addition, the Company
incurred capital lease obligations (not included in cash investing activities
above) primarily for computer hardware and related software totalling
$145,000 in 1996. There were no new capital lease obligations in 1998 or
1997.

Financing activities used cash of $4,487,000 in 1998 and $26,387,000
in 1997, and provided cash of $7,927,000 in 1996. In 1998, the Company repaid
$157,000 under its Revolving Credit Agreement, purchased and retired
$2,160,000 of 6 3/4% Convertible Subordinated Debentures, satisfying its 1998
annual sinking fund payment plus $465,000 of the 1999 sinking fund payment
and used $2,271,000 to service current maturities of long-term debt. In 1997,
the Company borrowed $49,500,000 under its current Revolving Credit Agreement
to repay the then outstanding principal balance under its former Credit
Agreement. Also in 1997, the Company repaid $13,968,000 under its current
Revolving Credit Agreement, prepaid $5,642,000 of principal on a mortgage
obligation, purchased and retired $1,755,000 of 6 3/4% Convertible
Subordinated Debentures, satisfying its annual sinking fund payment, and used
$5,022,000 to service current maturities of long-term debt. In 1996, the
Company borrowed $14,300,000 more under its former Credit Agreement than it
had borrowed in 1995 and used $4,206,000 of cash to service current
maturities of long-term debt, including the $1,725,000 annual sinking fund
payment on its 6-3/4% Convertible Subordinated Debentures. The Company did
not pay a cash dividend in 1998 or 1997. The Company paid cash dividends of
$2,167,000 in 1996.

The Company believes its cash flows from operations, along with its
borrowing capacity and access to financial markets are adequate to fund its
operations and debt maturities.

CORPORATE DEVELOPMENT

The Company has no commitments for any new store locations at the
present time. The Company reviews the performance of its less profitable
stores from time to time to determine whether it would be in the Company's
best interest to close any of these stores. Store closings could have a
significant impact on the Company's sales, expenses and capital requirements
and would likely entail additional significant one-time charges to effect the
closing and to recognize any impairment of assets resulting from the closing
decision. In 1998, the Company sold closed facilities in Jackson and
Kalamazoo, Michigan. At January 30, 1999, the Company holds a closed facility
in Dearborn, Michigan, pending disposition.

In 1997, the Company sold its Store for the Home in Grosse Pointe,
Michigan. In July 1998, the Company consolidated its home store operations in
its existing Apparel store in Grosse Pointe.

In 1999, the Company has begun a 17,000 square foot expansion of its
leased store in Naples, Florida and will remodel its Sarasota, Florida store.
Both projects are scheduled for completion in time for the 1999 Holiday
season.

<PAGE>

The Year 2000 issue results from early computer programming that
used two digits rather than four to define the applicable year. If not
corrected, this defect could, as the Company moves to the Year 2000, result
in systems failures or miscalculations leading to disruptions in operations.
The Company has taken actions to address this potential problem. In 1997, the
Company established an internal task force which identified areas of concern,
assigned a risk factor and priority to each area and evaluated the Company's
hardware, software and devices using embedded chips. After completing this
evaluation, it developed specific action plans to fix or replace all
non-compliant software and hardware that could pose a significant risk to the
Company's operations.

The substantial majority of costs to replace non-compliant systems
with Year 2000-compliant systems software and hardware would have been
incurred regardless of the Year 2000 issue to meet current business needs and
take advantage of new lower cost technology platforms. The Company expects to
spend approximately $800,000 in programming costs, primarily in 1998 and
1999, of which approximately $400,000 had been spent through January 30,
1999, to make current systems Year 2000-compliant and to integrate them with
new purchased software systems. The work is being performed principally by
internal staff. The Company cannot reasonably measure the portion of these
costs attributable solely to Year 2000 remediation versus work related to new
systems. Some non-compliant systems scheduled for replacement are being
remediated to ensure that the Company has compliant systems in the event that
new systems aren't ready timely. This cost is included in the above estimate.
The Company is scheduled to have all Year 2000-compliant systems tested and
implemented by September 1999.

The Company has requested Year 2000 compliance certification from
its hardware and software vendors and from key merchandise vendors to obtain
assurance that they have addressed Year 2000 issues that might disrupt the
Company's operations or merchandise flow. The Company is evaluating the
responses and has established a committee to develop contingency plans as
necessary to avoid merchandise flow problems or other disruptions to its
business.

Each of the above statements regarding future revenues, expenses or
business plans (including statements regarding the sufficiency of the
Company's capital resources to fund future operations) may be a "forward
looking statement" within the meaning of the Securities Exchange Act of 1934.
Such statements are subject to important factors and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statement, including the continued support of the Company's trade creditors
and factors, the risks inherent in the level of the Company's long-term debt
compared to its equity, the risks inherent in the Year 2000 computer issue,
the Company's ability to reduce its operating expenses, general trends in
retail clothing apparel purchasing, especially during the Christmas season,
and the factors set forth in this Management's Discussion and Analysis of
Financial Condition and Results of Operations.

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

- ------------------------------------------------------------------------------
Fixed Rate Obligations Variable Rate Obligations
---------------------- -------------------------
Amount Average Amount Average
Scheduled Maturity Date Maturing Interest Rate Maturing Interest Rate
- ------------------------------------------------------------------------------
1999 ................... $ 3,377 7.4% $ 342 3.9%
2000 ................... 3,869 7.3 316 3.7
2001 ................... 12,626 7.8 35,193 7.4
2002 ................... 3,268 7.1 318 3.7
2003 ................... 8,007 7.8 420 3.7
Thereafter ............. 28,632 6.8 7,154 3.7
------- ---- ------- ----
Total debt maturities .. $59,779 7.2% $43,743 6.7%
======= ==== ======= ===
Market value of debt at
January 30, 1999 ..... $55,900 $43,700
======= =======

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following financial statements and supplementary financial
information are filed as part of this report on pages F-1 through F-20:
Consolidated Statements of Earnings, Three Fiscal Years Ended
January 30, 1999.
Consolidated Statements of Cash Flows, Three Fiscal Years Ended
January 30, 1999.
Consolidated Balance Sheets, January 30, 1999, January 31, 1998 and
January 25, 1997.
Consolidated Statements of Shareholders' Equity, Three Fiscal years
Ended January 30, 1999.
Notes to Consolidated Financial Statements.
Summary of Significant Accounting Policies.
Quarterly Information (Unaudited).
Report of Independent Public Accountants.

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.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information called for by Part III is incorporated by reference
from those portions of the registrant's definitive proxy statement for its
1999 Annual Meeting of Shareholders to be held May 27, 1999, filed with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days
after the end of the fiscal year covered by this Form 10-K, appearing under
the following captions:

"VotingSecurities and Principal Holders Thereof" (pages 1-3,
inclusive, of the proxy statement).

"Election of Directors" (pages 4-8, inclusive, thereof).

"Executive Compensation" (pages 9-17, inclusive, thereof); but
excluding from this incorporation by reference everything
appearing under the captions "Compensation Committee Report
on Executive Compensation" and "Performance Graph" (pages
14-17, inclusive, thereof).

Information with respect to executive officers of the Company is set
forth on pages 10-11 of this report.

For the purpose of stating the aggregate market value of voting
stock held by non-affiliates on the cover of this report, the registrant
considers that the directors of the registrant, the executive officers listed
on page 10 of this report, the Jacobson's Retirement Savings & Profit Sharing
Plan, the Jacobson Pension Plan, and The Jacobson Stores Foundation are
affiliates, and that all other shareholders are non-affiliates. This
statement is without prejudice to the classification of any shareholder at
other times or for other purposes.

<PAGE>

PART IV

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

(a) The following financial statements, financial statement
schedules, and exhibits are filed as part of this report:

Page
----
(1) FINANCIAL STATEMENTS:

Consolidated Statements of Earnings, Three Fiscal Years
Ended January 30, 1999 F-1

Consolidated Statements of Cash Flows, Three Fiscal Years
Ended January 30, 1999 F-2

Consolidated Balance Sheets, January 30, 1999,
January 31, 1998, and January 25, 1997 F-3

Consolidated Statements of Shareholders' Equity, Three
Fiscal Years Ended January 30, 1999 F-4

Notes to Consolidated Financial Statements F-5/
F-15

Summary of Significant Accounting Policies F-16/
F-17

Quarterly Information (Unaudited) F-18/
F-19

Report of Independent Public Accountants F-20

(2) FINANCIAL STATEMENT SCHEDULES:

Schedule VIII - Valuation and Qualifying Accounts and
Reserves, Year Ended January 30, 1999 S-1

All schedules, except as set forth above, have been omitted since the
information required to be submitted has been included in the consolidated
financial statements or notes thereto or has been omitted as not applicable
or not required.

<PAGE>

(3) EXHIBITS:

Each management contract or compensatory plan required to be filed
as an exhibit pursuant to Item 14(c) of this report is indicated by an
asterisk (*).

10(a)* Amendment to Employment Agreement, between Jacobson Stores
Inc. and P. Gerald Mills, dated April 7, 1999.

10(b)* Amendment to Employment Agreement, between Jacobson Stores
Inc. and Paul W. Gilbert, dated April 7, 1999.

10(c)* Amendment to Employment Agreement, between Jacobson Stores
Inc. and James A. Rodefeld, dated April 7, 1999.

10(d)* Executive Employment Agreement, dated as of April 12, 1999,
between Jacobson Stores Inc. and Theodore R. Kolman.

10(e)* Deferred Compensation Plan, Amended and Restated effective
January 28, 1999.

10(f)* Jacobson Stores Inc. Management Incentive Plan, dated
March 25, 1999.

23 Consent of Arthur Andersen LLP.

27 Financial Data Schedule.

In addition, the previously-filed exhibits listed below are
incorporated herein by reference. (All references are to Securities and
Exchange Commission File #0-6319 unless otherwise noted.)

Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
3(i)(a) Restated Articles of Incorporation, Exhibit 19(a) to Form 10-Q,
Jacobson Stores Inc., as amended and Quarter Ended April 29,
restated May 25, 1989. 1989.

3(i)(b) Certificate of Designation, Preferences Exhibit 3(a) to Form 10-Q,
and Rights of Preferred Stock of Quarter Ended October 29,
Jacobson Stores Inc. 1988.

3(ii) By-laws, Jacobson Stores Inc., as Exhibit 3(ii) to Form 10-Q,
amended November 20, 1997. Quarter Ended October 25,
1997.

<PAGE>

</TABLE>
<TABLE>
<CAPTION>

Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
4(a) Revolving Credit Agreement, dated as Exhibit 4(c) to Form 10-K,
of March 24, 1997, between Jacobson Year Ended January 25, 1997.
Stores Inc. and The CIT Group/Business
Credit, as agent.

4(b) Amendment to Revolving Credit Agreement, Exhibit 4 to Form 10-Q,
dated June 8, 1998. Quarter Ended August 1, 1998.

4(c) Election under Section 780, Michigan Exhibit 28 to Form 10-Q,
Business Corporation Act. Quarter Ended October 27,
1984.

4(d) Indenture dated as of December 15, File #33-10532:
1986 between Jacobson Stores Inc. Exhibit 4(a) to Form S-2
and National Bank of Detroit, as (Amendment No. 1), filed
Trustee. December 12, 1986.

4(e) Rights Agreement dated as of October 9, Exhibit I to Form 8-A, dated
1998 between Jacobson Stores Inc. and October 26, 1998.
Norwest Bank Minnesota, N.A., as
Rights Agent.

10(g)* Employment Agreement, dated as of Exhibit 10(a) to Form 10-Q,
June 11, 1998, between Jacobson Stores Inc. Quarter Ended May 2, 1998.
and P. Gerald Mills.

10(h)* Employment Agreement, dated as of Exhibit 10(b) to Form 10-Q,
June 11, 1998, between Jacobson Stores Inc. Quarter Ended May 2, 1998.
and Paul W. Gilbert.

10(i)* Employment Agreement, dated as of Exhibit 10(c) to Form 10-Q,
June 11, 1998, between Jacobson Stores Inc. Quarter Ended May 2, 1998.
and James A. Rodefeld.

10(j)* Executive Employment Agreement, dated as Exhibit 10(a) to Form 10-Q,
of July 6, 1998, between Jacobson Stores Inc. Quarter Ended October 31,
and George P. Kelly. 1998.

10(k)* Executive Employment Agreement, dated as Exhibit 10(d) to Form 10-K
of April 15, 1998, between Jacobson Stores Year Ended January 31, 1998.
Inc. and Herman J. Heinle.

10(l)* Release and Waiver Agreement dated Exhibit 10 to Form 10-Q,
May 26, 1998, between Jacobson Stores Inc. Quarter Ended August 1, 1998.
and Herman J. Heinle.

<PAGE>

Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
10(m)* Split Dollar Agreement, dated January 31, Exhibit 10(k) to Form 10-K
1992, between Jacobson Stores Inc. and Year Ended January 27, 1996.
Paul W. Gilbert.

10(n)* Release and Settlement Agreement effective Exhibit 10(a) to Form 10-Q
May 25, 1997, between Jacobson Stores Inc. Quarter Ended July 26,1997.
and Joseph H. Fisher.

10(o)* Release and Waiver Agreement dated Exhibit 10(a) to Form 10-Q
October 7, 1997, between Jacobson Quarter Ended October 25,
Stores Inc. and Robert L. Moles. 1997.

10(p)* Jacobson Stores Inc. Deferred Exhibit 10(f) to Form 10-K
Compensation Plan, as amended Year Ended January 31, 1998.
and restated March 26, 1998.

10(q)* Jacobson Stock Option Plan of 1994. Exhibit A to Proxy Statement
in connection with the Annual
Meeting of Shareholders held
on May 26, 1994.

10(r)* First Amendment to Jacobson Stock Exhibit 10(m) to Form 10-K,
Option Plan of 1994. Year Ended January 27, 1996.

10(s)* Second Amendment to Jacobson Stock Exhibit 10(b) to Form 10-Q,
Option Plan of 1994. Quarter Ended July 26, 1997.

10(t)* Third Amendment to Jacobson Stock Exhibit A to Proxy Statement
Option Plan of 1994. dated April 10, 1998 in connec-
tion with Annual Meeting of
Shareholders held May 28, 1998.

10(u)* Jacobson Stores Inc. Management Exhibit 10(g) to Form 10-K,
Incentive Plan, dated March 26, 1998. Year Ended January 31, 1998.

21 Schedule of Subsidiaries. Exhibit 21 to Form 10-K, Year
Ended January 27, 1996.
</TABLE>

With the exception of Exhibits 4(a), 4(b) and 4(d),
instruments defining the rights of holders of long-term debt of the
registrant and its subsidiaries have been omitted. The amount of debt
authorized under each such omitted instrument is less than 10% of the total
assets of the registrant and its subsidiaries on a consolidated basis. The
registrant agrees to furnish a copy of any such instrument to the Securities
and Exchange Commission upon request.

<PAGE>

In addition to Exhibits 10(a) through 10(d) and 10(g) to 10(m),
inclusive, the registrant has employment agreements with two other executive
officers, which are not considered material in amount or significance.

(b) The Company did not file any reports on Form 8-K during
its fourth fiscal quarter ended January 30, 1999.

(d) See Item 14(a)(2).

<PAGE>

SIGNATURES

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

DATE: April 8, 1999 JACOBSON STORES INC.

By: /s/ P. Gerald Mills
---------------------------------------
P. Gerald Mills, Chairman of the Board,
President and Chief 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 the
registrant and in the capacities and on the dates indicated.

JACOBSON STORES INC. Date
----

By: /s/ P. Gerald Mills April 8, 1999
--------------------------------------
P. Gerald Mills, Chairman of the
Board, President and Chief
Executive Officer, and Director
(Principal Executive Officer)

By: /s/ Paul W. Gilbert April 8, 1999
--------------------------------------
Paul W. Gilbert, Vice Chairman
of the Board, and Director
(Principal Financial Officer)

By: /s/ Timothy J. Spalding April 8, 1999
--------------------------------------
Timothy J. Spalding, Vice
President and Controller
(Principal Accounting Officer)

<PAGE>

JACOBSON STORES INC. Date
----

By: /s/ Herbert S. Amster April 8, 1999
--------------------------------------
Herbert S. Amster, Director

By: /s/ Leslie E. Dietzman April 8, 1999
--------------------------------------
Leslie E. Dietzman, Director

By: /s/ Herman S. Kohlmeyer, Jr. April 8, 1999
--------------------------------------
Herman S. Kohlmeyer, Jr., Director

By: /s/ Kathleen McCree Lewis April 8, 1999
--------------------------------------
Kathleen McCree Lewis, Director

By: /s/ Michael T. Monahan April 8, 1999
--------------------------------------
Michael T. Monahan, Director

By: /s/ M. Marnette Perry April 8, 1999
--------------------------------------
M. Marnette Perry, Director

By: /s/ Philip H. Power April 8, 1999
--------------------------------------
Philip H. Power, Director

By: /s/ Richard Z. Rosenfeld April 8, 1999
--------------------------------------
Richard Z. Rosenfeld, Director

By: /s/ Robert L. Rosenfeld April 8, 1999
--------------------------------------
Robert L. Rosenfeld, Director

By: /s/ James L. Wolohan April 8, 1999
--------------------------------------
James L. Wolohan, Director

<PAGE>

JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

Year Ended
-------------------------------------
January 30, January 31, January 25,
(in thousands except per share data) 1999 1998(1) 1997
- ------------------------------------------------------------------------------

NET SALES ............................. $ 444,305 $ 447,471 $ 432,469
--------- --------- ---------

COSTS AND EXPENSES:
Cost of merchandise sold, buying and
occupancy expenses .............. 295,272 300,918 293,826
Selling, general and administrative
expenses ........................ 139,220 138,797 142,348
Interest expense, net .............. 7,915 9,178 9,384
Store closing costs (credit) ....... -- (340) 4,200
Gain on sale of property ........... (617) (2,987) --
--------- --------- ---------

Total costs and expenses .... 441,790 445,566 449,758
--------- --------- ---------

EARNINGS (LOSS) BEFORE INCOME TAXES ... 2,515 1,905 (17,289)

PROVISION (CREDIT) FOR INCOME TAXES ... 880 691 (5,827)
--------- --------- ---------

NET EARNINGS (LOSS) ................... $ 1,635 $ 1,214 $ (11,462)
========= ========= =========

EARNINGS (LOSS) PER COMMON SHARE:
Basic and Diluted .................. $ 0.28 $ 0.21 $ (1.98)
========= ========= =========

(1) 53 week year.

The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (pages F-16 and F-17) are an integral part of these
statements.

F-1

<PAGE>

JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended
-------------------------------------
January 30, January 31, January 25,
(in thousands) 1999 1998(1) 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) ........................... $ 1,635 $ 1,214 $(11,462)
Gain on sale of property ...................... (617) (2,987) --
Store closing costs (credit) .................. -- (340) 4,200
Adjustments to reconcile net earnings
(loss) to cash provided by (used in)
operating activities:
Depreciation and amortization .............. 8,429 9,128 10,195
Deferred taxes ............................. (74) 263 (5,449)
Other liabilities .......................... (337) 570 1,436
Change in:
Receivables from customers, net ......... 1,973 7,586 1,424
Merchandise inventories ................. (4,379) 8,800 (5,626)
Prepaid expenses and other assets ....... (37) 1,590 1,005
Accounts payable and accrued expenses ... 5,579 (2,521) 1,811
Current income taxes .................... 82 1,215 2,174
-------- -------- --------
Net cash provided by (used in)
operating activities ............. 12,254 24,518 (292)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property ................ 1,001 4,068 --
Additions to property and equipment ........... (10,095) (4,114) (5,590)
Other non-current assets ...................... 373 927 (242)
-------- -------- --------
Net cash provided by (used in)
investing activities ............. (8,721) 881 (5,832)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt ................... -- 49,500 14,300
Reduction of long-term debt ................... (4,588) (75,887) (4,206)
Proceeds of exercise of stock options ......... 101 -- --
Cash dividends paid ........................... -- -- (2,167)
-------- -------- --------
Net cash provided by (used in)
financing activities ............. (4,487) (26,387) 7,927
-------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ............................... (954) (988) 1,803
Cash and cash equivalents,
beginning of year ........................... 3,883 4,871 3,068
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR ........... $ 2,929 $ 3,883 $ 4,871
======== ======== ========
<FN>
(1) 53 week year

SUPPLEMENTARY CASH FLOW INFORMATION
The Company considers all short-term investments with a maturity at date of
purchase of three months or less to be cash equivalents.

Investing and financing activities not reported in the Consolidated
Statements of Cash Flows, because they do not involve cash, include equipment
acquired through capital lease obligations of $145,000 in 1996. There were no
new capital lease obligations in 1998 and 1997.

Interest paid (net of interest capitalized) was $7,948,000 in 1998,
$9,330,000 in 1997 and $9,233,000 in 1996. The Company paid income taxes
totalling $872,000 in 1998. The Company received income tax refunds totalling
$782,000 in 1997 and $2,541,000 in 1996.

The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (pages F-16 and F-17) are an integral part of these
statements.
</TABLE>

F-2

<PAGE>

JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

January 30, January 31, January 25,
(in thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............ $ 2,929 $ 3,883 $ 4,871
Receivables from customers, net ...... 32,151 34,124 41,710
Merchandise inventories .............. 90,454 86,075 94,875
Prepaid expenses and other assets .... 1,370 1,333 2,923
Refundable income taxes .............. -- -- 855
Deferred taxes ....................... 4,894 3,696 3,994
--------- --------- ---------
Total current assets ........... 131,798 129,111 149,228
--------- --------- ---------
PROPERTY AND EQUIPMENT, NET .............. 84,989 83,707 89,802
--------- --------- ---------
OTHER ASSETS ............................. 20,088 20,461 21,388
--------- --------- ---------
$ 236,875 $ 233,279 $ 260,418
========= ========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ..... $ 3,719 $ 3,972 $ 4,350
Accounts payable ...................... 34,769 32,108 31,320
Accrued expenses ...................... 16,774 13,856 17,505
Accrued income taxes .................. 442 360 --
--------- --------- ---------
Total current liabilities ...... 55,704 50,296 53,175
--------- --------- ---------
LONG-TERM DEBT ........................... 99,803 104,138 130,147
--------- --------- ---------
DEFERRED TAXES ........................... 6,386 5,262 5,297
--------- --------- ---------
OTHER LIABILITIES ........................ 4,045 4,382 3,812
--------- --------- ---------
SHAREHOLDERS' EQUITY:
Common stock .......................... 5,975 5,966 5,966
Paid-in surplus ....................... 7,201 7,109 7,109
Retained earnings ..................... 58,160 56,525 55,311
Treasury stock ........................ (399) (399) (399)
--------- --------- ---------
70,937 69,201 67,987
--------- --------- ---------
$ 236,875 $ 233,279 $ 260,418
========= ========= =========

<FN>

The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (pages F-16 and F-17) are an integral part of these
statements.

</TABLE>

F-3

<PAGE>

JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Common Paid-in Retained Treasury
(in thousands except number of shares) Stock Surplus Earnings Stock
- ---------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
BALANCE, January 27, 1996 .................. $ 5,966 $ 7,109 $ 68,940 $ (399)

FIFTY-TWO WEEKS ENDED January 25, 1997:
Net loss ................................ -- -- (11,462) --
Dividends paid, 37 1/2cents per share ... -- -- (2,167) --
-------- -------- -------- --------

BALANCE, January 25, 1997 .................. 5,966 7,109 55,311 (399)

FIFTY-THREE WEEKS ENDED January 31, 1998:
Net earnings ............................ -- -- 1,214 --
-------- -------- -------- --------

BALANCE, January 31, 1998 .................. 5,966 7,109 56,525 (399)
-------- -------- -------- --------

FIFTY-TWO WEEKS ENDED January 30, 1999:
Net earnings ............................ -- -- 1,635 --
Exercise of stock options ............... 9 92 -- --
-------- -------- -------- --------

BALANCE, January 30, 1999 .................. $ 5,975 $ 7,201 $ 58,160 $ (399)
======== ======== ======== ========

<FN>

PREFERRED STOCK
Authorized 1,000,000 shares, $1 par value; no shares outstanding at
January 25, 1997, January 31, 1998 and January 30, 1999.

COMMON STOCK
Authorized 15,000,000 shares, $1 par value; 5,966,2212/3 shares issued at
January 25, 1997 and January 31, 1998 and 5,975,4092/3 shares issued at
January 30, 1999. Shares issued include 187,200 shares in treasury at January
25, 1997, January 31, 1998 and January 30, 1999.

The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (pages F-16 and F-17) are an integral part of these
statements.

</TABLE>

F-4

<PAGE>

JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INTEREST EXPENSE

Components of net interest expense are summarized below:

(in thousands) 1998 1997 1996
- -----------------------------------------------------------------

Revolving Credit line ................ $3,089 $3,630 $2,071
Real estate obligations .............. 2,891 3,083 3,383
Long-term debt ....................... 2,060 2,452 3,934
Capital lease obligations ............ 40 77 120
------ ------ ------
8,080 9,242 9,508
Less interest earned on
short-term investments ............. 65 64 46
Less interest capitalized on
properties under development ....... 100 -- 78
------ ------ ------
$7,915 $9,178 $9,384
====== ====== ======

STORE CLOSING

In March 1997, the Company closed three underperforming stores in Jackson,
Kalamazoo and Dearborn, Michigan. The Company incurred a $4,200,000 pre-tax
charge in fiscal 1996 to recognize estimated severance and related benefits
and expense to hold the closed facilities pending disposition and to state
property and equipment at estimated fair value. Store closing reserve
activity was as follows:

(in thousands) 1998 1997 1996
- ----------------------------------------------------------------------

Reserve at beginning of year ......... $ 2,623 $ 4,200 $ --
Reserve related to properties sold ... (2,210) -- --
Payments against reserve ............. (288) (1,237) --
Charges (credits) against reserve .... -- (340) 4,200
------- ------- -------

Reserve at end of year ............... $ 125 $ 2,623 $ 4,200
======= ======= =======

At January 30, 1999, the store closing reserve is included in accrued
expenses and represents estimated expense to hold a closed facility pending
disposition.

Store closing credits totalled $224,000 after-tax in 1997. In 1996, store
closing costs totalled $2,772,000 after-tax.

GAIN ON SALE OF PROPERTY

In fiscal 1998, the Company sold properties in Jackson and Kalamazoo,
Michigan, at a combined after-tax gain totalling $407,000. In 1997, the
Company sold its Store for the Home in Grosse Pointe, Michigan. In 1997,
after-tax gains on sales of property totalled $1,972,000, including the
Grosse Pointe property and immaterial gains on two non-operating properties.

ADVERTISING EXPENSE

The Company expenses advertising costs the first time the advertising takes
place. Advertising expense totalled $17,566,000 in 1998, $16,735,000 in 1997
and $13,962,000 in 1996.

F-5

<PAGE>

TAXES

The provision (credit) for income taxes consisted of:

(in thousands) 1998 1997 1996
- ----------------------------------------------------

Currently payable $ 954 $ 428 $ (378)
Deferred ........ (74) 263 (5,449)
------- ------- -------
$ 880 $ 691 $(5,827)
======= ======= =======

Income taxes as a percent of earnings (loss) before income taxes differed
from the statutory Federal income tax rate as follows:

(percent of earnings before income taxes) 1998 1997 1996
- -------------------------------------------------------------------

Statutory Federal income tax rate ....... 34.0% 34.0% (34.0)%
Other ................................... 1.0 2.3 0.3
---- ---- -----
35.0% 36.3% (33.7)%
==== ==== =====

Deferred income taxes represent temporary differences in the recognition of
certain items for income tax and financial reporting purposes and are
classified as current or non-current in the consolidated balance sheets based
on the classification of the assets and liabilities which gave rise to the
temporary differences. The components of the net deferred income tax
liability at January 30, 1999, January 31, 1998 and January 25, 1997, were as
follows:
January January January
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------

Deferred Tax Liabilities:
Accelerated depreciation ......... $ 2,658 $ 3,292 $ 3,930
Additional pension cost
deductible or tax purposes ..... 5,152 5,208 5,811
Other ............................ 216 354 827
------- ------- -------
8,026 8,854 10,568
------- ------- -------
Deferred Tax Assets:
Store closing reserves ........... -- 906 1,428
Accrued employee benefits ........ 1,592 1,029 914
Accrued vacation pay ............. 1,292 1,283 1,267
Additional inventory capitalized
for tax purposes ............... 991 980 1,076
Alternative minimum tax credit
carryforward ................... -- 962 922
Net operating loss carryforward .. -- -- 1,119
Deferred rent .................... 1,031 944 558
Other ............................ 1,628 1,184 1,981
------- ------- -------
6,534 7,288 9,265
------- ------- -------
Net deferred tax liability ........... $ 1,492 $ 1,566 $ 1,303
======= ======= =======

The Company believes it is more likely than not that deferred tax assets will
be used to offset future tax obligations. Accordingly, the Company has not
recorded a related valuation allowance.

Taxes other than income taxes were as follows:

(in thousands) 1998 1997 1996
- ------------------------------------------------------------------------------

Payroll taxes .............................. $ 8,087 $ 8,195 $ 8,074
Real estate and personal property taxes .... 4,185 4,337 4,317
Other taxes ................................ 1,061 913 1,084
------- ------- -------

$13,333 $13,445 $13,475
======= ======= =======

F-6

<PAGE>

CUSTOMER CREDIT AND RECEIVABLES

Credit sales under Jacobson credit plans were 35.7% of total sales in 1998,
38.1% in 1997 and 44.6% in 1996. Credit plans consist of option and extended
payment accounts.

Revenues and direct costs associated with the Company's credit program are
summarized below:

(in thousands) 1998 1997 1996
- ------------------------------------------------------------------------------

Finance charge revenues and fees .......... $5,650 $6,185 $5,844
------ ------ ------

Cost of credit operation:
Credit and collection administration ... 1,274 1,392 1,754
Allocated interest expense ............. 2,543 2,922 3,028
Provision for doubtful accounts,
net of recoveries .................... 885 993 1,026
Provision for income taxes ............. 322 299 12
------ ------ ------
5,024 5,606 5,820
------ ------ ------
Net income from credit program ............ $ 626 $ 579 $ 24
====== ====== ======

As a percent of credit sales ........... 0.4% 0.3% -- %
====== ====== ======

The finance charge rate assessed under the Company's credit plans is 20.4%.
Allocated interest expense is computed at the average rate of interest
incurred on the Revolving Credit line applied to the average total
receivables from customers. The average rate was 8.0% in 1998, 8.3% in 1997
and 7.5% in 1996.

Receivables from customers at year-end were as follows:

January January January
(in thousands) 1999 1998 1997
- -----------------------------------------------------------------------

Receivables from customers ........ $32,749 $34,761 $42,460
Less reserve for doubtful
accounts ........................ 598 637 750
------- ------- -------

$32,151 $34,124 $41,710
======= ======= =======

Accounts written off, net of recoveries, were $924,000 in 1998, $1,106,000 in
1997 and $1,049,000 in 1996 (0.58%, 0.65% and 0.54%, respectively, of credit
sales).

MERCHANDISE INVENTORIES

All merchandise inventories are valued at cost, which is lower than market,
as determined by the retail last-in, first-out (LIFO) method. At year-end,
merchandise inventories were as follows:

January January January
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------

Inventories at first-in,
first-out (FIFO) cost ........... $108,263 $104,708 $111,955
Less LIFO reserves ................ 17,809 18,633 17,080
-------- -------- --------
$ 90,454 $ 86,075 $ 94,875
======== ======== ========

F-7

<PAGE>

LONG-TERM LEASES

At January 30, 1999, the Company was obligated under non-cancelable long-term
leases for certain stores or portions of stores, and for certain fixtures and
equipment. Many of the leases contain renewal options. Most require payment
of taxes, insurance, and other costs applicable to the property and some
require additional rentals based on percentages of sales, which are recorded
as rental expense for both capital and operating leases.

Future minimum rental commitments as of January 30, 1999, for all
non-cancelable leases which had a remaining term of more than one year were
as follows:

Operating Capital
(in thousands) Leases Leases
- ---------------------------------------------------------------
1999 ................................. $ 8,004 $ 208
2000 ................................. 7,638 76
2001 ................................. 7,618 76
2002 ................................. 7,540 8
2003 ................................. 7,349 --
Thereafter ........................... 102,080 --
-------- -----
Total minimum lease payments ......... $140,229 368
========
Less imputed interest ................ 37
-----
Capital lease obligations, including
current maturities of $186 ......... $ 331
=====

Capital leases are treated as installment purchases of depreciable property
and included in the consolidated balance sheets as property and equipment
while the related lease obligations are included in long-term debt. Interest
based on these obligations and amortization based on the lease terms are
charged to current operations in lieu of rental expense. All other leases are
considered operating leases and are accounted for by recording rental expense
over the terms of the leases.

Rental expense (net of rental income) was as follows:

(in thousands) 1998 1997 1996
- -------------------------------------------------- ---------------

Buildings and improvements:
Operating leases:
Minimum rent .............. $7,146 $7,003 $5,651
Percentage rent ........... 1,188 1,652 1,034
Capital leases:
Percentage rent ........... 273 272 292
------ ------ ------
$8,607 $8,927 $6,977
====== ====== ======

Fixtures and equipment:
Operating leases ............. $ 927 $ 864 $ 802
====== ====== ======

F-8

<PAGE>

PROPERTY AND EQUIPMENT

Property and equipment at year-end are set forth below:

January January January
(in thousands) 1999 1998 1997
- ---------------------------------------------------------------------------

Land and improvements .............. $ 8,439 $ 8,496 $ 9,010
Buildings and improvements ......... 88,702 87,948 90,739
Furniture, fixtures and equipment .. 55,113 49,710 49,364
Leasehold improvements ............. 12,742 13,038 12,286
Construction in progress ........... 3,636 3,384 1,727
Capital leases ..................... 9,232 9,232 9,954
-------- -------- --------
177,864 171,808 173,080
Less accumulated depreciation and
amortization ..................... 92,875 88,101 83,278
-------- -------- --------
$ 84,989 $ 83,707 $ 89,802
======== ======== ========

Depreciation and amortization amounted to $8,429,000 in 1998, $9,128,000 in
1997 and $10,195,000 in 1996.

CAPITAL AND MAINTENANCE EXPENDITURES

Capital expenditures, including amounts under capital leases, for the past
three years are summarized below:

Stores and Store Support Facilities
(in thousands) Modernization and Equipment Total
- -----------------------------------------------------------------

1998 ....... $ 2,255 $ 7,840 $10,095
1997 ....... 1,332 2,782 4,114
1996 ....... 4,444 1,291 5,735

Stores and store modernization expenditures include those made for the
acquisition of land, buildings and improvements, and related fixtures and
equipment for new stores and expansion and re-fixturing of existing stores.
Support facilities and equipment expenditures relate to information systems
and corporate office and service center facilities.

Repairs and maintenance expense totalled $1,879,000 in 1998, $1,972,000 in
1997 and $2,201,000 in 1996.

RETIREMENT PLANS

The Company has a trusteed non-contributory defined benefit pension plan
covering substantially all of its employees. Benefits under the plan are
based on a final average pay formula. Service cost and the projected benefit
obligation under the projected unit credit actuarial method reflect the
impact of estimated increases in compensation on future pension benefits.
Unrecognized pension costs and credits, including actuarial gains and losses,
are amortized over the average remaining service period of those employees
expected to receive pension benefits. Pension expense was $162,000 in 1998,
$1,775,000 in 1997 and $2,113,000 in 1996. The Company's funding policy
satisfies the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 and the Internal Revenue Code of 1986. Pension plan
assets are managed by independent investment managers.

F-9

<PAGE>
Net periodic pension expense was as follows:

Components of Net Pension Expense
(in thousands) 1998 1997 1996
- -------------------------------------------------------------------------
Service cost for benefits earned
during the year ................ $ 1,657 $ 2,341 $ 2,324
Interest cost on projected
benefit obligation ............. 3,759 3,868 3,634
Expected return on assets ........ (5,383) (4,906) (4,406)
Net amortization and deferral .... 129 472 561
------- ------- -------
Net pension expense .............. $ 162 $ 1,775 $ 2,113
======= ======= =======

Changes in the projected benefit obligation, plan assets and reconciliation
of the funded status of the plan were as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------
Funded Status (in thousands) 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Change in Projected Benefit Obligation:
Projected benefit obligation at beginning of year ... $ 53,059 $ 52,724 $ 51,196
Service cost for benefits earned during the year .... 1,657 2,341 2,324
Interest cost on projected benefit obligation ....... 3,759 3,868 3,634
Amendments .......................................... -- (470) --
Actuarial (gain) loss ............................... 4,022 (2,756) (1,765)
Benefits paid ....................................... (3,180) (2,648) (2,665)
-------- -------- --------
Projected benefit obligation at end of year.. $ 59,317 $ 53,059 $ 52,724
======== ======== ========
Change in Plan Assets:
Fair value of plan assets at beginning of year ...... $ 70,257 $ 58,357 $ 50,879
Actual return on plan assets ........................ 2,811 13,259 5,895
Employer contribution ............................... -- 1,289 4,248
Benefits paid ....................................... (3,180) (2,648) (2,665)
-------- -------- --------
Fair value of plan assets at end of year .... $ 69,888 $ 70,257 $ 58,357
======== ======== ========
Reconciliation of Funded Status:
Funded status ....................................... $ 10,571 $ 17,198 $ 5,633
Unrecognized net actuarial (gain) loss .............. 4,488 (1,977) 10,074
-------- -------- --------
Net prepaid pension cost(1) ................. $ 15,059 $ 15,221 $ 15,707
======== ======== ========
<FN>
(1)Included in other assets on the consolidated balance sheets.
</TABLE>

Actuarial Assumptions 1998 1997 1996
- ----------------------------------------------------------------------------
Discount rate:
Beginning of year...................... 7 1/4% 7 1/2% 7 1/4%
End of year............................ 6 3/4 7 1/4 7 1/2
Expected return on plan assets............ 9 9 9
Rate of increase in compensation.......... 5 5 5

The Company contributed and charged to expense $277,000 in 1998, $263,000 in
1997 and $294,000 in 1996 for multi-employer pension plans. These
contributions were determined in accordance with the provisions of negotiated
labor contracts and generally are based on the number of hours worked. Under
the provisions of the Multi-Employer Pension Plan Amendments Act of 1980, if
the Company should substantially or totally withdraw from a multi-employer
pension fund, it would be required to continue contributions to such plan to
the extent of its portion of the plan's unfunded vested liability. Management
has no plans to terminate operations that would subject the Company to such
liability.

F-10

<PAGE>

The Company has a qualified salary deferral plan under Internal Revenue Code
Section 401(k). All employees of the Company who have completed one year of
service and are at least age 21 are eligible to participate in this plan.
Under this plan, the Company may elect to match 20% of the first 3% of
employee contributions per participant. These matching contributions vest
immediately. The charges to operations for matching contributions to the plan
were $330,000 in 1998, $351,000 in 1997 and $366,000 in 1996.

ACCRUED EXPENSES

Accrued expenses at year-end were as follows:

January January January
(in thousands) 1999 1998 1997
- -------------------------------------------------------------------------

Wages and vacation pay ........... $ 7,135 $ 7,158 $ 7,804
Pension .......................... -- -- 181
Taxes other than income taxes .... 1,733 1,431 1,844
Interest ......................... 870 877 1,048
Other ............................ 7,036 4,390 6,628
------- ------- -------
$16,774 $13,856 $17,505
======= ======= =======

FINANCING

The Company has a $100,000,000 revolving credit facility under a Revolving
Credit Agreement with a commercial lender. The revolving credit facility
provides for borrowings of up to $80,000,000, subject to a borrowing base
limitation and lender reserves. The Company may, at its option, increase the
maximum available borrowings under the facility to up to $100,000,000 in the
aggregate, subject to the borrowing base limitation and lender reserves.
Loans under the facility bear interest at either or both of two variable
interest rate alternatives as chosen by the Company. One of the interest
rates may decrease if the Company meets specified performance measures, which
were not met in 1998. The facility also permits up to $5,000,000 in letters
of credit, which decrease the amount available for loans.

Borrowings under the Revolving Credit facility mature on March 24, 2001. Each
year, beginning in 1999, the Company may request a one-year extension of the
maturity date, subject to lender approval. Any party may terminate the
facility as of the maturity date by giving 90 days notice. The Company may
also terminate the facility early upon 90 days notice if it pays a
termination fee equal to one-half of one percent a year (for what would have
been the remaining term of the facility) of the average daily balance of
loans and letters of credit under the facility since its inception. The
facility carries a line of credit fee equal to one-quarter of one percent a
year of the excess of the aggregate commitments under the facility (currently
$80,000,000) over the amount of loans and letters of credit outstanding and
an agent's fee of $45,000 a year. Borrowings under the facility are
guaranteed by the Company's subsidiaries and secured by accounts receivable,
inventory and related intangible assets and proceeds thereof of the Company
and its subsidiaries.

Revolving Credit line borrowings and interest rates for the past three years
were as follows:

(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------

Maximum amount outstanding.............. $55,974 $54,899 $43,500
Daily weighted average amount
outstanding........................... 38,801 43,277 27,707
Daily weighted average interest rate.... 8.0% 8.3% 7.5%

F-11

<PAGE>

At year-end, long-term debt, less current maturities, consisted of the
following:

January January January
(in thousands) 1999 1998 1997
- ------------------------------------------------------------------------------

6 3/4% Convertible Subordinated
Debentures due 2011 ................... $ 27,600 $ 29,325 $ 31,050
Mortgage notes and collateral trust
bonds due through 2013,
at rates from 5.89% to 8.45% ......... 28,657 30,582 37,827
Term loan, at a fixed rate of 7.99% ..... -- -- 20,000
Industrial development revenue
bond obligations due through 2015,
at variable rates below prime ........ 8,526 8,868 9,126
Notes under Revolving Credit line, at a
blended rate below prime ............. 34,875 35,032 31,500
-------- -------- --------
99,658 103,807 129,503

Capital lease obligations ............... 145 331 644
-------- -------- --------

$ 99,803 $104,138 $130,147
======== ======== ========

The 6 3/4% Convertible Subordinated Debentures are convertible to shares of
the Company's common stock at any time prior to maturity, unless previously
redeemed, at $32.67 per share, subject to adjustment in certain events. The
debentures are redeemable at the option of the Company at par. Mandatory
annual sinking fund payments of $1,725,000 are required each December 15. At
January 30, 1999, 883,000 shares of authorized common stock were reserved for
conversion.

The Company's current loan agreements include, among other things, covenants
requiring minimum working capital and minimum net worth, and restricting
capital expenditures, capital stock redemptions and dividend payments. The
Revolving Credit Agreement limits cash dividends to 50.0% of net income for
the immediately preceding fiscal year, subject to a maximum of $.50 per
outstanding share per year and borrowing availability restrictions.

Aggregate maturities of long-term debt for the next five years are as
follows:

Capital
Long-Term Lease
(in thousands) Debt Obligations(1) Total
- -----------------------------------------------------------------------------

1999................................... $ 3,533 $186 $ 3,719
2000................................... 4,119 66 4,185
2001................................... 47,747 72 47,819
2002................................... 3,580 7 3,587
2003................................... 8,427 -- 8,427

(1) Excluding imputed interest.

Based on the quoted market price of the 6 3/4% Convertible Subordinated
Debentures due 2011 and on the current rates offered to the Company for other
long-term debt of similar remaining maturities, the estimated fair value of
total long-term debt, excluding capital lease obligations, was less than the
carrying value by approximately $4,000,000 at January 30, 1999, $6,500,000 at
January 31, 1998 and $8,100,000 at January 25, 1997.

F-12

<PAGE>

STOCK OPTIONS

At January 30, 1999, 734,875 shares of Jacobson Stores Inc. common stock were
reserved for issuance under a stock option plan adopted in 1994 and options
for an additional 658,937 shares were available for grant to directors and
employees.

The Company follows the disclosure requirements of Financial Accounting
Standards Statement No. 123, "Accounting for Stock-Based Compensation", but
continues to account for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for these plans
been determined in accordance with SFAS No. 123 in 1998, the Company would
have had net earnings of $776,000 ($0.13 per share). In 1997, the Company's
net earnings and earnings per common share would have been $501,000 ($0.09
per share) under SFAS No. 123, and in 1996 the Company's net loss per common
share would have been $12,036,000 ($2.08 per share).

Option activity for the past three years was as follows:

Number Weighted Average
of Shares Option Price
--------- ------------
Options outstanding at January 27, 1996
(including exercisable options for
108,663 shares) ...................... 331,350 $11.31

Activity during 1996:
Granted .............................. 186,500 8.84
Expired .............................. 122,250 10.70
-------

Options outstanding at January 25, 1997
(including exercisable options for
239,350 shares) ...................... 395,600 10.33

Activity during 1997:
Granted .............................. 357,000 8.93
Expired .............................. 131,850 12.33
-------
Options outstanding at January 31, 1998
(including exercisable options for
304,313 shares) ...................... 620,750 9.14

Activity during 1998:
Granted .............................. 173,000 13.66
Exercised ............................ 9,188 11.01
Expired .............................. 49,687 11.50
-------

Options outstanding at January 30, 1999
(including exercisable options for
456,907 shares) ...................... 734,875 $10.02
======= ======

The weighted average fair value of options granted in 1998, 1997 and 1996
totalled $7.87, $6.18 and $5.27, respectively. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option
pricing model. The weighted average assumptions used in valuing the option
grants for 1998, 1997 and 1996, respectively, were expected life, 9.88, 9.94
and 9.89 years; interest rate, 5.60%, 6.73% and 6.35%; and volatility (the
measure by which the stock price has fluctuated or will be expected to
fluctuate during the period), 34.93%, 37.07% and 34.87%.

At January 30, 1999, 501,625 of the outstanding options have exercise prices
that range between $7.25-$9.75, with a weighted average exercise price of
$8.69. Of these options, 397,594 options are exercisable, with a weighted
average exercise price of $8.51 and a weighted average contractual maturity
of 7.9 years. The remaining 233,250 outstanding options have exercise prices
that range between $10.19-$14.38, with a weighted average exercise price of
$12.87. Of these options, 59,303 options are exercisable, with a weighted
average exercise price of $11.72 and a weighted average contractual maturity
of 5.4 years.

F-13

<PAGE>

PREFERRED STOCK PURCHASE RIGHTS

On August 27, 1998, the Board of Directors declared a dividend of one Series
A Preferred Stock Purchase Right on each Common Share outstanding. The
dividend was payable to shareholders of record on October 25, 1998, and is
payable with respect to certain common shares issued thereafter. The Company
also adopted a Rights Agreement, effective October 25, 1998, to replace an
expiring Rights Plan, pursuant to which the Rights are issued. Each Right,
when it becomes exercisable, entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series A Preferred Stock at an
exercise price of $100, subject to adjustment. The Company has reserved
100,000 shares of Series A Preferred Stock for issuance on the exercise of
the Rights. The Rights trade with the Company's Common Shares until they
become exercisable, which occurs on the date of public announcement that any
person or group has acquired, or 10 days (or such later date as the Board of
Directors may determine) after the commencement of, or public announcement of
an intention to commence, an offer to acquire beneficial ownership of 20% or
more of the Company's Common Shares (subject to certain exceptions, including
an offer to buy all shares that is approved by the Company's disinterested
directors). After the Rights become exercisable, each Right (except those of
the acquiring person or group) will entitle the holder to purchase upon
exercise of the Right, at the then current exercise price of the Right,
Company Common Shares having an average market value of twice the current
exercise price of the Right. Alternatively, if the Company is acquired in a
merger or other business combination or if more than 50% of its assets or
earning power are sold to an acquiring person or in a transaction in which
all holders of Common Shares are not treated alike, each Right (except those
of the acquiring person or group) will entitle the holder to purchase, upon
exercise, at the then current exercise price of the Right, common shares of
the acquiring company having an average market value of twice the current
exercise price of the Right. The Rights may be redeemed by the Company for
one cent per Right prior to the date a person or group acquires 20% or more
of the Company's Common Shares, and will expire on October 25, 2008, unless
extended or earlier redeemed by the Board of Directors.

EARNINGS PER SHARE

Basic earnings per common share are computed by dividing reported earnings
available to common shareholders by weighted average common shares
outstanding. Diluted earnings per common share give effect to dilutive
potential common shares. Earnings per common share are calculated as follows:

(dollars and shares in thousands) 1998 1997 1996
- -------------------------------------------------------------------------

Earnings (loss) available to
common shareholders .............. $ 1,635 $ 1,214 $(11,462)
======== ======== ========

Weighted average common shares
outstanding ...................... 5,784 5,779 5,779
Dilutive stock options ............. 118 44 --
-------- -------- --------

Shares used to calculate dilute
earnings per common share ..... 5,902 5,823 5,779
======== ======== ========

Earnings (loss) per common share:
Basic ........................... $ .28 $ .21 $ (1.98)
Diluted ......................... .28 .21 (1.98)
======== ======== ========

Potential common shares attributable to stock options or assumed conversion
of debentures are reported in the above table only if dilutive. Potential
shares represented by anti-dilutive stock options totalled 152,000, 165,000
and 232,000 in 1998, 1997 and 1996, respectively.

The Company's 6 3/4% Convertible Subordinated Debentures due 2011 represent
potential common shares for computation of diluted earnings per share, but
are anti-dilutive for 1998, 1997 and 1996. Assumed conversion of the
debentures would have added 925,000, 972,000 and 1,042,000 to shares used to
calculate diluted earnings per share in 1998, 1997 and 1996, respectively.

F-14

<PAGE>

CONDENSED BALANCE SHEETS

Condensed balance sheets of Jacobson Stores Realty Company, Jacobson Credit
Corp. and merchandising operations are shown below:

January January January
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------
JACOBSON STORES REALTY COMPANY
- --------------------------------------------------------------------
Current assets .................... $ 71 $ 182 $ 189
Advances to Jacobson Stores Inc. .. 28,607 26,141 25,589
Property and equipment, net ....... 43,245 46,933 51,458
Investments and other assets ...... 2,334 2,461 2,633
-------- -------- --------
Assets ..................... $ 74,257 $ 75,717 $ 79,869
======== ======== ========

Current liabilities ............... $ 3,447 $ 3,929 $ 2,932
Long-term debt .................... 36,637 38,571
45,746
Other liabilities ................. 1,476 1,891 2,299
Equity of Jacobson Stores Inc. .... 32,697 31,326 28,892
-------- -------- --------
Liabilities and Equity ..... $ 74,257 $ 75,717 $ 79,869
======== ======== ========

JACOBSON CREDIT CORP
- --------------------------------------------------------------------
Current assets .................... $ -- $ -- $ --
Advances to Jacobson Stores Inc. .. 8,524 8,524 8,524
-------- -------- --------
Assets ..................... $ 8,524 $ 8,524 $ 8,524
======== ======== ========

Current liabilities ............... $ -- $ -- $ --
Equity of Jacobson Stores Inc. .... 8,524 8,524 8,524
-------- -------- --------
Liabilities and Equity ..... $ 8,524 $ 8,524 $ 8,524
======== ======== ========

JACOBSON STORES INC
(merchandising operations)
- --------------------------------------------------------------------
Current assets .................... $131,787 $130,235 $149,950
Property and equipment, net ....... 41,744 36,774 38,344
Investments and other assets ...... 20,972 21,278 22,094
-------- -------- --------
Assets ..................... $194,503 $188,287 $210,388
======== ======== ========

Current liabilities ............... $ 52,320 $ 47,673 $ 50,729
Long-term debt .................... 63,166 65,567 84,401
Other liabilities ................. 10,070 8,931 8,474
Advances from subsidiaries ........ 37,131 34,665 34,113
Shareholders' equity .............. 31,816 31,451 32,671
-------- -------- --------
Liabilities and Equity ..... $194,503 $188,287 $210,388
======== ======== ========

F-15

<PAGE>

JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF REPORTING. Jacobson Stores Inc. operates specialty department
stores in 24 cities in Michigan, Indiana, Kansas, Kentucky, Ohio and
Florida. The consolidated financial statements include the accounts of
the Company and two wholly-owned subsidiaries, Jacobson Stores Realty
Company and Jacobson Credit Corp. All significant inter-company
transactions and balances have been eliminated.

FISCAL YEAR. The Company's fiscal year ends on the last Saturday in
January. Fiscal year 1997 consisted of 53 weeks and ended January 31,
1998. Fiscal years 1998 and 1996 consisted of 52 weeks and ended January
30, 1999 and January 25, 1997, respectively.

SALES. Sales are net of returns. Restaurant and alteration revenues are
reflected as a reduction of cost of merchandise sold. Finance charge
revenues are recorded as income when earned and are reflected as a
reduction of selling, general and administrative expenses.

RECEIVABLES FROM CUSTOMERS. An account is reviewed for write-off if
payment of 20% (one full monthly payment) has not been received during
the previous four month period or if it is otherwise determined that the
account is uncollectible.

MERCHANDISE INVENTORIES. All merchandise inventories are valued at cost,
which is lower than market, as determined by the retail last-in,
first-out (LIFO) method.

PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost.
Major replacements and improvements are charged to the property and
equipment accounts. Maintenance, repairs and minor replacements are
charged to expense as incurred. When assets are sold, retired, or fully
depreciated, their cost and related accumulated depreciation and
amortization are removed from the property and equipment accounts, and
any gain or loss is reflected in the consolidated statements of earnings.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization are provided
on the straight-line basis over the estimated useful lives of the
property and equipment, or over the respective lease terms, if such
periods are shorter. Buildings and improvements are depreciated over ten
to forty years. Furniture, fixtures and equipment are depreciated over
five to ten years.

CAPITALIZATION OF INTEREST. Interest expense incurred on properties under
development is capitalized to reflect properly the costs of properties up
to the time they are ready for their intended use. The amounts
capitalized are then amortized over the respective lives of the
depreciable assets.

PRE-OPENING EXPENSES. Expenditures of a non-capital nature associated
with opening a new store are charged to expense using the straight-line
method in the twelve months immediately following the opening.

INCOME TAXES. Deferred income taxes result from differences between the
tax basis of an asset or liability and its reported amount in the
consolidated financial statements (temporary differences) and are
adjusted for changes in tax laws and rates.

F-16

<PAGE>

EARNINGS PER SHARE. Basic earnings per share are computed by dividing
reported earnings available to common shareholders by weighted average
common shares outstanding. Diluted earnings per share give effect to
potential common shares represented by stock options and the Company's 6
3/4% Convertible Subordinated Debentures due 2011, except if
anti-dilutive. If dilutive, the debentures would be converted to common
stock in the computation of diluted earnings per share with a
corresponding increase in net earnings to reflect reduction in related
interest expense, net of income taxes.

FINANCIAL INSTRUMENTS. With the exception of long-term debt and
shareholders' equity, the Company records all financial instruments,
including cash equivalents, receivables from customers and accounts
payable, at or in amounts approximating market value.

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

RECLASSIFICATIONS. Certain amounts in prior year financial statements
have been reclassified to conform to the 1998 presentation. None of these
reclassifications affected net earnings.

CHANGE IN ACCOUNTING PRINCIPLES - SEGMENT REPORTING. Effective January
30, 1999, the Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 introduces a new model for segment
reporting, called the "management approach". The management approach is
based on the way the Company's decision-makers organize segments for
making operating decisions and assessing performance.

The Company sells women's, men's and children's apparel and accessories,
as well as home accessories, at its store locations. The Company's
decision makers evaluate each store's operating performance. Under this
organization, the operating segments have been aggregated into one
reportable segment. The accounting policies of the operating segments are
the same as those described in this Summary of Significant Accounting
Policies.

F-17

<PAGE>

JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
QUARTERLY INFORMATION (unaudited)

OPERATING RESULTS

The unaudited quarterly operating results shown below were prepared using the
same accounting policies that are applied to the annual data.

<TABLE>
<CAPTION>
Quarter
-----------------------------------------------
(in thousands, except per share data) First Second Third Fourth
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998
- ----
Net sales ..................................... $ 114,825 $ 95,256 $ 95,636 $ 138,588
Cost of merchandise sold, buying and
occupancy expenses ......................... 72,762 70,184 63,099 89,227
Selling, general and administrative expenses .. 36,204 31,390 35,165 36,461
Interest expense, net ......................... 1,948 1,978 1,881 2,108
Gain on sale of property ...................... -- -- (659) 42
Earnings (loss) before income taxes ........... 3,911 (8,296) (3,850) 10,750
Net earnings (loss) ........................... 2,542 (5,392) (2,503) 6,988
Earnings (loss) per common share:
Basic ...................................... $ .44 $ (.93) $ (.43) $ 1.21
Diluted .................................... .42 (.93) (.43) 1.21

1997
- ----
Net sales ..................................... $ 111,908 $ 95,938 $ 94,715 $ 144,910
Cost of merchandise sold, buying and
occupancy expenses ......................... 72,314 72,381 59,587 96,636
Selling, general and administrative expenses .. 33,800 30,561 34,421 40,015
Interest expense, net ......................... 2,448 2,289 2,148 2,293
Store closing costs (credit) .................. -- (340) -- --
Gain on sale of property ...................... -- -- -- (2,987)
Earnings (loss) before income taxes ........... 3,346 (8,953) (1,441) 8,953
Net earnings (loss) ........................... 2,175 (5,819) (937) 5,795
Earnings (loss) per common share:
Basic ...................................... $ .38 $ (1.00) $ (.16) $ 1.00
Diluted .................................... .38 (1.00) (.16) .98

1996
- ----
Net sales ..................................... $ 106,525 $ 93,990 $ 90,778 $ 141,176
Cost of merchandise sold, buying and
occupancy expenses ......................... 68,260 69,258 59,410 96,898
Selling, general and administrative expenses .. 34,436 31,586 33,355 42,971
Interest expense, net ......................... 2,272 2,272 2,262 2,578
Store closing costs ........................... -- -- -- 4,200
Earnings (loss) before income taxes ........... 1,557 (9,126) (4,249) (5,471)
Net earnings (loss) ........................... 1,012 (5,931) (2,763) (3,780)
Earnings (loss) per common share:
Basic ...................................... $ .18 $ (1.02) $ (.48) $ (.65)
Diluted .................................... .18 (1.02) (.48) (.65)

</TABLE>

F-18

<PAGE>

The Company's business is seasonal in nature. Traditionally, a higher
proportion of sales and net earnings is generated in the fourth quarter
(which includes the Christmas season). The anticipated effective annual tax
rate is used to compute income taxes on a quarterly basis. The gross margins
used in calculating cost of goods sold for interim periods include an
allocation of the estimated annual LIFO provision, which cannot be determined
precisely until the year-end inventory value is known and the Bureau of Labor
Statistics Department Store Index is published in February.

The impact of LIFO on earnings per share as it was reported and as it would
have been had the actual charge (benefit) been known when the quarterly
allocations were made is shown below.

As Reported As Reallocated
---------------------- ------------------------
Quarter 1998 1997 1996 1998 1997 1996
- --------------------------------- ------------------------

1st $.04 $.04 $.06 $(.02) $.04 $.01
2nd .03 .03 .01 (.02) .04 .01
3rd .03 .03 .03 (.02) .04 -
4th (.19) .08 (.07) (.03) .06 .01
---- ---- ---- ---- ---- ----

$(.09) $.18 $.03 $(.09) $.18 $.03
===== ==== ==== ===== ==== ====

F-19

<PAGE>

JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Jacobson Stores Inc.:

We have audited the accompanying consolidated balance sheets of JACOBSON
STORES INC. (a Michigan corporation) and subsidiaries as of January 30,
1999, January 31, 1998 and January 25, 1997 and the related consolidated
statements of earnings, shareholders' equity and cash flows for each of
the three fiscal years in the period ended January 30, 1999. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Jacobson
Stores Inc. and subsidiaries as of January 30, 1999, January 31, 1998 and
January 25, 1997 and the results of their operations and their cash flows
for each of the three fiscal years in the period ended January 30, 1999,
in conformity with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP
------------------------
Detroit, Michigan
March 5, 1999

F-20

<PAGE>

JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES

SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

JANUARY 30, 1999
(in thousands)

Column A Column B Column C Column D Column E

Amounts
Charged Deductions
Balance (Credited) For Balance
Beginning to Costs & Amounts End of
Description of Period Expenses Paid Period
----------- --------- -------- ---- ------

<S> <C> <C> <C> <C>
52 WEEKS ENDED JANUARY 25, 1997:

Store Closing Costs -
Severance and related benefits ......... $ -- $ 900 $ -- $ 900
Reserve to state property and
equipment at estimated fair value ... -- 2,350 -- 2,350
Expense to hold closed facilities
pending disposition ................. -- 950 -- 950
------- ------- ------- -------

$ -- $ 4,200 $ -- $ 4,200
======= ======= ======= =======

53 WEEKS ENDED JANUARY 31, 1998:

Store Closing Costs -
Severance and related benefits ......... $ 900 $ (200) $ (700) $ --
Reserve to state property and
equipment at estimated fair value ... 2,350 (140) -- 2,210
Expense to hold closed facilities
pending disposition ................. 950 -- (537) 413
------- ------- ------- -------

$ 4,200 $ (340) $(1,237) $ 2,623
======= ======= ======= =======

52 WEEKS ENDED JANUARY 30, 1999:

Store Closing Costs -
Reserve to state property and
equipment at estimated fair value ... $ 2,210 $(2,210) $ -- $ --
Expense to hold closed facilities
pending disposition ................. 413 -- (288) 125
------- ------- ------- -------

$ 2,623 $(2,210) $ (288) $ 125
======= ======= ======= =======

</TABLE>

S-1

<PAGE>

EXHIBITS

10(a) Amendment to Employment Agreement, between Jacobson Stores
Inc. and P. Gerald Mills, dated April 7, 1999.

10(b) Amendment to Employment Agreement, between Jacobson Stores
Inc. and Paul W. Gilbert, dated April 7, 1999.

10(c) Amendment to Employment Agreement, between Jacobson Stores
Inc. and James A. Rodefeld, dated April 7, 1999.

10(d) Executive Employment Agreement, dated as of April 12, 1999,
between Jacobson Stores Inc. and Theodore R. Kolman.

10(e) Deferred Compensation Plan, Amended and Restated effective
January 28, 1999.

10(f) Jacobson Stores Inc. Management Incentive Plan, dated
March 25, 1999.

23 Consent of Arthur Andersen LLP.

27 Financial Data Schedule.

In addition, the previously-filed exhibits listed below are
incorporated herein by reference. (All references are to Securities and
Exchange Commission File #0-6319 unless otherwise noted.)

<TABLE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
3(i)(a) Restated Articles of Incorporation, Exhibit 19(a) to Form 10-Q,
Jacobson Stores Inc., as amended and Quarter Ended April 29,
restated May 25, 1989. 1989.

3(i)(b) Certificate of Designation, Preferences Exhibit 3(a) to Form 10-Q,
and Rights of Preferred Stock of Quarter Ended October 29,
Jacobson Stores Inc. 1988.

3(ii) By-laws, Jacobson Stores Inc., as Exhibit 3(ii) to Form 10-Q,
amended November 20, 1997. Quarter Ended October 25,
1997.

E-1

<PAGE>

<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
4(a) Revolving Credit Agreement, dated as Exhibit 4(c) to Form
10-K, of March 24, 1997, between Jacobson Year Ended January 25,
Stores Inc. and The CIT Group/Business 1997.
Credit, as agent.

4(b) Amendment to Revolving Credit Agreement, Exhibit 4 to Form 10-Q,
dated June 8, 1998. Quarter Ended August 1,
1998.

4(c) Election under Section 780, Michigan Exhibit 28 to Form 10-Q,
Business Corporation Act. Quarter Ended October 27,
1984.

4(e) Rights Agreement dated as of October 9, Exhibit I to Form 8-A, dated
1998 between Jacobson Stores Inc. and October 26, 1998.
Norwest Bank Minnesota, N.A., as
Rights Agent.

10(g) Employment Agreement, dated as of Exhibit 10(a) to Form 10-Q,
June 11, 1998, between Jacobson Stores Inc. Quarter Ended May 2, 1998.
and P. Gerald Mills.

10(h) Employment Agreement, dated as of Exhibit 10(b) to Form 10-Q,
June 11, 1998, between Jacobson Stores Inc. Quarter Ended May 2, 1998.
and Paul W. Gilbert.

10(i) Employment Agreement, dated as of Exhibit 10(c) to Form 10-Q,
June 11, 1998, between Jacobson Stores Inc. Quarter Ended May 2, 1998.
and James A. Rodefeld.

10(j) Executive Employment Agreement, dated as Exhibit 10(a) to Form 10-Q,
of July 6, 1998, between Jacobson Stores Inc. Quarter Ended October 31,
and George P. Kelly. 1998.

10(k) Executive Employment Agreement, dated as of Exhibit 10(d) to Form 10-K
April 15, 1998, between Jacobson Stores Inc. Year Ended January 31,
and Herman J. Heinle. 1998.

10(l) Release and Waiver Agreement dated Exhibit 10 to Form 10-Q,
May 26, 1998, between Jacobson Stores Inc. Quarter Ended August 1,
and Herman J. Heinle. 1998.

E-2

<PAGE>

<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
10(m) Split Dollar Agreement, dated January 31, Exhibit 10(k) to Form 10-K
1992, between Jacobson Stores Inc. and Year Ended January 27, 1996.
Paul W. Gilbert

10(n) Release and Settlement Agreement effective Exhibit 10(a) to Form 10-Q
May 25, 1997, between Jacobson Stores Inc. Quarter Ended July 26,1997.
and Joseph H. Fisher.

10(o) Release and Waiver Agreement dated Exhibit 10(a) to Form 10-Q
October 7, 1997, between Jacobson Quarter Ended October 25,
Stores Inc. and Robert L. Moles. 1997.

10(p) Jacobson Stores Inc. Deferred Exhibit 10(f) to Form 10-K
Compensation Plan, as amended Year Ended January 31, 1998.
and restated March 26, 1998.

10(q) Jacobson Stock Option Plan of 1994. Exhibit A to Proxy Statement
in connection with the Annual
Meeting Shareholders held on
May 26, 1994.

10(r) First Amendment to Jacobson Stock Exhibit 10(m) to Form 10-K,
Option Plan of 1994. Year Ended January 27, 1996.

10(s) Second Amendment to Jacobson Stock Exhibit 10(b) to Form 10-Q,
Option Plan of 1994. Quarter Ended July 26, 1997.

10(t) Third Amendment to Jacobson Stock Exhibit A to Proxy Statement
Option Plan of 1994. dated April 10, 1998 in connec-
tion with Annual Meeting of
Shareholders held May 28,
1998.

10(u) Jacobson Stores Inc. Management Exhibit 10(g) to Form 10-K,
Incentive Plan, dated March 26, 1998. Year Ended January 31, 1998.

21 Schedule of Subsidiaries. Exhibit 21 to Form 10-K, Year
Ended January 27, 1996.

</TABLE>

E-3

Exhibit 10(a)

AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is entered into
as of April 7, 1999, between JACOBSON STORES INC., a Michigan corporation of
Jackson, Michigan (the "Company"), and P. GERALD MILLS, of Chelsea, Michigan
("Mills").

THE PARTIES HEREBY AGREE that the restated Employment Agreement
between them dated as of June 11, 1998 (the "Agreement"), is amended
effective April 11, 1999, as follows:

1. Employment and Term. The date "April 15, 2000" in paragraph 1 of
the Agreement is amended to read "April 15, 2001".

2. Compensation. The phrase "Three Hundred Thousand Dollars
($300,000)" in paragraph 2 of the Agreement is amended to read "Three Hundred
Fifty Thousand Dollars ($350,000)".

3. Change in Control. The figure "40%" appearing twice in paragraph
5(e)(iii)(1) and once in paragraph 5(e)(iii)(3) of the Agreement is amended
to read "20%".

Except as expressly amended hereby, the Agreement shall continue in
full force and effect.

IN THE PRESENCE OF: JACOBSON STORES INC.

/s/ Dana J. Collins By: /s/ Paul W. Gilbert
- --------------------------------- --------------------------------
Paul W. Gilbert
Its: Vice Chairman of the Board

/s/ Timothy J. Spalding /s/ P. Gerald Mills
-------------------------------- ------------------------------------
P. Gerald Mills

Exhibit 10(b)

AMENDMENT TO EMPLOYMENT AGREEMENT

THE PARTIES HEREBY AGREE that the restated Employment Agreement
between them dated as of June 11, 1998 (the "Agreement"), is amended
effective April 11, 1999, as follows:

1. Compensation. The phrase "Three Hundred Thousand Dollars
($300,000)" in paragraph 2 of the Agreement is amended to read "Three Hundred
Fifty Thousand Dollars ($350,000)".

2. Change in Control. The figure "40%" appearing twice in paragraph
5(e)(iii)(1) and once in paragraph 5(e)(iii)(3) of the Agreement is amended
to read "20%".

Except as expressly amended hereby, the Agreement shall continue in
full force and effect.

IN THE PRESENCE OF: JACOBSON STORES INC.

/s/ Timothy J. Spalding By: /s/ P. Gerald Mills
- --------------------------------- --------------------------------
P. Gerald Mills
Its: Chairman of the Board and
Chief Executive Officer

/s/ Dana J. Collins /s/ Paul W. Gilbert
-------------------------------- ------------------------------------
Paul W. Gilbert

Exhibit 10(c)

AMENDMENT TO EMPLOYMENT AGREEMENT

THE PARTIES HEREBY AGREE that the restated Employment Agreement
between them dated as of June 11, 1998 (the "Agreement"), is amended
effective April 11, 1999, as follows:

1. Compensation. The phrase "Two Hundred Thousand Dollars
($200,000)" in paragraph 2 of the Agreement is amended to read "Two Hundred
Fifty Thousand Dollars ($250,000)".

2. Change in Control. The figure "40%" appearing twice in paragraph
5(e)(iii)(1) and once in paragraph 5(e)(iii)(3) of the Agreement is amended
to read "20%".

Except as expressly amended hereby, the Agreement shall continue in
full force and effect.

IN THE PRESENCE OF: JACOBSON STORES INC.

/s/ Timothy J. Spalding By: /s/ P. Gerald Mills
- ----------------------------------- ----------------------------------
P. Gerald Mills
Its: Chairman of the Board and
Chief Executive Officer

/s/ Dana J. Collins /s/ James A. Rodefeld
- ----------------------------------- --------------------------------------
James A. Rodefeld

Exhibit 10(d)

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT is entered into April 12 , 1999, between JACOBSON
STORES INC., a Michigan corporation, of Jackson, Michigan (the "Company"),
and Theodore R. Kolman the "Employee").

THE PARTIES AGREE AS FOLLOWS:

1. Employment and Term. The Company employs Employee as Senior Vice
President-General Merchandise Manager, and Employee agrees to serve in that
capacity and/or in such other capacity or capacities as the Chief Executive
Officer of the Company deems advisable, commencing April 11, 1999, and
continuing through April 15, 2000, unless terminated sooner pursuant to the
provisions of paragraph 4, for the salary and on the terms set forth herein.

2. Compensation. Subject to the provisions of paragraph 4, the
Company agrees to pay Employee salary at an annual rate of $ 175,000, in
bi-weekly or other regular periodic installments no less frequent than
monthly.

3. Duties. Employee agrees, as long as employment by the Company
continues, to devote Employee's entire time and best efforts to furthering
the interests of the Company; to comply with all regulations and policies of
the Company; and to perform the duties requested by any officers and
executives of the Company to whom the Employee is directed to report.

4. Termination. Employee's employment under this Agreement shall
terminate on the earliest to occur of the following: (1) immediately upon
Employee's death, (2) at the Company's option, immediately when notice to
Employee of such termination is given after Employee's permanent incapacity
(established to the reasonable satisfaction of the Chief Executive Officer of
the Company), (3) at the Company's option, immediately when notice to
Employee of such termination is given (for any reason or for no reason and
regardless of whether there is good cause for such termination), (4) 30 days
after notice of such termination is given to the Company by Employee, and (5)
April 15, 2000. Notice will be deemed to be given on the earliest of (1) when
delivered, or (2) three business days after mailed by certified or registered
mail, postage prepaid, return receipt requested, or (3) one business day
after sent by recognized overnight courier, if to Employee, to Employee's
address on the Company's corporate records, and if to the Company, to the
address of its principal executive offices. The following events during the
term of this Agreement shall have the following respective effects on the
obligations of the Company pursuant hereto:

(a) If employment is terminated due to Employee's death or
permanent incapacity, the Company shall have no obligation to pay any salary
or other amounts or benefits under this Agreement or otherwise for any period
after the date of termination of employment, but benefits may continue to the
extent provided in any wage continuation program, insurance, or other
employee benefit plans that are generally applicable to all employees of the
Company and that are maintained by the Company at that time.

<PAGE>

(b) Except as otherwise provided in paragraph 4(c), if
employment is terminated by the Company (for any reason or for no reason and
regardless of whether there is good cause for such termination), or if
Employee resigns or retires before or at the expiration of the term, the
Company shall have no obligation to pay any salary or other amounts or
benefits under this Agreement or otherwise for any period after the date of
termination of employment, but benefits may continue to the extent provided
in any severance program, wage continuation program, insurance, or other
employee benefit plans that are generally applicable to all employees of the
Company and that are maintained by the Company at that time.

(c) If (1) a "Change in Control" (as defined below) occurs
during the term of Employee's employment under this Agreement, and (2) either
Employee terminates Employee's employment with the "Entity" (as defined
below) for "Good Reason" (as defined below) or the "Entity" terminates
Employee's employment without "Cause" (as defined below), both within one
year after the Change in Control, Employee will receive an amount equal to
Employee's annual salary at the rate set forth in paragraph 2 for the period
from the date of such termination through the date that is 24 months after
the date such Change in Control occurs. Such payments shall be made at the
times provided in paragraph 2. The Company may withhold from such payments
all federal, state, city and other taxes to the extent such taxes are
required to be withheld by applicable law. The Company's obligation to pay
the salary continuation payments provided in this paragraph 4(c) shall
survive the expiration of the term.

(i) For purposes of this Agreement, a "Change in
Control" occurs on the first day any one or more of the following
occurs:

(A) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), together with all
affiliates and associates of such person (as such terms are
defined in Rule 12b-2 under the Exchange Act) but excluding
all "Excluded Persons" (as defined in paragraph 4(c)(ii)),
becomes the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of securities
of the Company representing (A) 20% or more of the combined
voting power of all of the Company's outstanding securities
entitled to vote generally in the election of the Company's
directors, or (B) 20% or more of the combined shares of the
Company's capital stock then outstanding, all except in
connection with any merger, consolidation, reorganization or
share exchange involving the Company;

(B) the consummation of any merger,
consolidation, reorganization or share exchange involving
the Company, unless the holders of the Company's capital
stock outstanding immediately before such transaction own
more than 50% of the combined outstanding shares of capital
stock and have more than 50% of the combined voting power in
the surviving entity after such transaction and they own
such securities in substantially the same proportions
(relative to each other) as they owned the Company's capital
stock immediately before such transaction;

(C) the consummation of any sale or other
disposition (in one transaction or a series of related
transactions) of all, or substantially all, of the Company's
assets to a person whose acquisition of 20% or more of the
combined shares of the Company's capital stock then
outstanding would have caused a Change in Control under
paragraph 4(c)(i)(A); or

- 2 -

<PAGE>

(D) the "Continuing Directors" (as defined in
paragraph 4(c)(iii)) cease to be a majority of the Company's
directors.

A determination by the Company's Continuing Directors (by
resolution of at least a majority of the Continuing Directors) as
to whether a Change in Control has occurred for purposes of this
Agreement, the date on which it has occurred or both shall be
conclusive for purposes of this Agreement.

(ii) For purposes of this Agreement, the "Excluded
Persons" are (1) Employee, (2) any "group" (as that term is used
in Section 13(d) of the Exchange Act and the rules thereunder)
that includes Employee or in which Employee is, or has agreed to
become, an equity participant, (3) any entity in which Employee
is, or has agreed to become, an equity participant, (4) the
Company, (5) any subsidiary of the Company, (6) any employee
benefit plan of the Company or any subsidiary of the Company or
the related trust, (7) any entity to the extent it is holding
capital stock of the Company for or pursuant to the terms of any
employee benefit plan of the Company or any subsidiary of the
Company, and (8) any director, officer or beneficial owner of at
least 10% of the Company's outstanding Common Stock as of the date
of this Agreement. For purposes of this Agreement, Employee shall
not be deemed an "equity participant" in any group or entity (1)
in which Employee owns for investment purposes only no more than
5% of the stock of a publicly-traded entity whose stock is either
listed on a national stock exchange or quoted in The NASDAQ
National Market, if Employee is not otherwise affiliated with such
group or entity, or (2) if Employee's participation is
fully-disclosed to, and approved by, the Company's Chief Executive
Officer before the Change in Control occurs.

(iii) For purposes of this Agreement, the "Continuing
Directors" are the directors of the Company as of the date of this
Agreement, and any person who subsequently becomes a director if
such person is appointed to be a director by a majority of the
Continuing Directors or if such person's initial nomination for
election or initial election as a director is recommended or
approved by a majority of the Continuing Directors.

(iv) Termination of Employee's employment for "Good
Reason" means Employee's voluntary termination of employment with
the Entity after a Change in Control as a result of (1) any
decrease by the Entity (without Employee's consent) in Employee's
salary from Employee's salary immediately before such Change in
Control; provided, that no such decrease shall constitute "Good
Reason" if such decrease is applied in the same manner to all
officers or employees at the same employment level as Employee
(such as all officers or all store managers, as the case may be),
(2) a substantial change by the Entity (without Employee's
consent) in Employee's duties or responsibilities from Employee's
duties and responsibilities immediately before such Change in
Control, or (3) any requirement by the Entity (to which Employee
does not consent) that Employee change Employee's primary place of
business. "Good Reason" will not include Employee's death,
permanent incapacity or Retirement (as defined below), or
Employee's resignation other than as provided in the preceding
sentence. For purposes of this Agreement, "Retirement" means
Employee's retirement from the Entity in accordance with the
Entity's normal policies.

(v) The Entity's termination of Employee's employment
without "Cause" means a termination other than for (1) Employee's
continued failure either to (A) devote substantially full time to
Employee's employment duties (except because of Employee's illness
or disability) or (B) make a good faith effort to perform
Employee's employment duties; (2) any other willful act or
omission which Employee knew, or had reason to know, would
materially injure the Entity; or (3) Employee's conviction of a
felony involving dishonesty or fraud.

- 3 -

<PAGE>

(vi) For purposes of this Agreement, the "Entity"
shall mean both (1) the Company and (2) in connection with a
Change in Control defined in paragraph 4(c)(i)(B) or paragraph
4(c)(i)(C), the survivor of the merger, consolidation,
reorganization or share exchange involving the Company and the
buyer of all, or substantially all, of the Company's assets, if
such additional entity described in this clause (2) (if other than
the Company) has offered to employ Employee on such terms that
would not constitute "Good Reason" for termination of Employee's
employment if imposed by the Company. Therefore, for purposes of
this paragraph 4(c), Employee shall not be deemed to have
terminated Employee's employment with the Entity for "Good Reason"
and the "Entity" shall not be deemed to have terminated Employee's
employment without "Cause" unless such actions are taken by all
entities included within the definition of "Entity". In addition,
for purposes of this paragraph 4(c), Employee shall not be deemed
to have terminated Employee's employment with the Entity for "Good
Reason" and the "Entity" shall not be deemed to have terminated
Employee's employment without "Cause" if (1) the survivor of the
merger, consolidation, reorganization or share exchange involving
the Company and the buyer of all, or substantially all, of the
Company's assets has offered to employ Employee on such terms that
would not constitute "Good Reason" for termination of Employee's
employment if imposed by the Company, (2) Employee refuses such
employment, and (3) the Company terminates Employee's employment
for any reason or for no reason.

(d) The severance benefits provided in this paragraph 4 are
exclusive and in lieu of any other severance benefits to which Employee may
be entitled, except for any benefits under the terms of any stock options or
restricted stock agreements Employee may have.

(e) There is not, nor will there be unless in writing signed
by both Employee and the Company, any express or implied agreement as to
Employee's continued employment by the Company after the end of the term of
Employee's employment under this Agreement. Employee's subsequent employment
with the Company, if any, will be employment "at will", and the provisions of
this Agreement will not apply to any such employment.

5. Previous Agreements Superseded. This Agreement supersedes all
previous employment agreements between the parties.

6. Miscellaneous Provisions. This Agreement may be amended only by
written agreement signed by either the Chairman or Vice Chairman of the
Company. It shall be construed according to the laws of Michigan, and shall
be binding on and enforceable by the parties and their successors in
interest.

IN THE PRESENCE OF: JACOBSON STORES INC.

/s/ James K. Delaney By: /s/ P. Gerald Mills
- ---------------------------------- ------------------------------
Its Chairman of the Board
COMPANY

/s/ Marshall W. Jorgenson /s/ Theodore R. Kolman
- ---------------------------------- ----------------------------------
EMPLOYEE

- 4 -

Exhibit 10(e)

JACOBSON STORES INC.
DEFERRED COMPENSATION PLAN
(Amended and Restated effective January 28, 1999)

ARTICLE I

Purpose

1.1 The purpose of this Deferred Compensation Plan is to extend to key
executives of Jacobson Stores Inc. a vehicle under which they may
elect in advance to defer and invest future earnings in order to
provide a source of funds at retirement.

ARTICLE II

Definitions

Unless the context otherwise requires, the following terms shall have the
meanings listed below:

2.1 Account - The separate deferred compensation account established
and maintained for each Participant.

2.2 Aggregate Value of the Account - Determined by the amount of
compensation that the Participant elects to defer plus the value
added from interest as more fully set forth in Article III hereof.

2.3 Allocation of Deferred Income - Deferred compensation will be
credited to the Participant's Account as of the date such
compensation would otherwise have been payable.

2.4 Board of Directors - The Board of Directors of the Corporation.

2.5 Corporation - Jacobson Stores Inc., a Michigan corporation.

2.6 Deferred Income - That portion of a Participant's income payable
as a monthly base salary or any merit bonus awarded or any fees
earned with respect to any Earning Period, the payment of which
Participant has elected to defer under the Plan.

2.7 Earning Period - Each twelve (12) month period commencing May 1.

2.8 Eligible Participant - Any Director, Officer or other Employee
designated by the Board of Directors as being eligible to be a
Participant in the Plan.

2.9 Employee - Any person who is receiving remuneration for personal
services rendered to the Corporation or a subsidiary as an
employee hereof.

2.10 Effective Date - The effective date of the Plan is September 1,
1990.

- 1 -

<PAGE>

2.11 Merit Bonus - Additional compensation awarded, with respect to an
Earning Period, to an Eligible Participant in the form of an
executive bonus which is declared by the Board of Directors to be
a Merit Bonus for the purposes of the Plan.

2.12 Participant - Any Eligible Participant who elects to participate
in the Plan in respect of any Earning Period and receives
compensation eligible to be Deferred Income with respect to such
Earning Period.

2.13 Plan - Jacobson Stores Inc. Deferred Compensation Plan, as amended
from time to time.

2.14 Subsidiary - Any corporation or association in which 50% or more
of the outstanding voting stock of such corporation or association
is owned, either directly or indirectly, by Jacobson Stores Inc.

ARTICLE III

Account Growth

3.1 Interest Bearing Account - The deferred compensation for a
particular year will be treated as a cash Account with interest
compounded annually and accrued at a rate to be determined from
time to time by the Compensation Committee of the Board of
Directors.

ARTICLE IV

Distribution of Account

4.1 Time of Distribution - The Aggregate Value shall be distributed to
a Participant within ninety (90) days after the earliest of the
following events:

1. resignation or termination of employment with or service to
the Corporation or any Subsidiary;
2. permanent incapacity, established to the reasonable
satisfaction of the Committee referred to in Article VI
hereof;
3. death; or
4. retirement.

4.2 Resignation or Termination for Reasons Other Than Death, Permanent
Incapacity or Retirement - Participants who resign or terminate
employment or service for reasons other than death, permanent
incapacity or retirement will receive payment of the Aggregate
Value of the Account in the form of a lump-sum payment.

4.3 Distribution in the Event of Retirement - Participants who retire
while employed by or in service to Jacobson Stores Inc. or any
Subsidiary shall receive payment of their Aggregate Value of the
Account in the form of a lump-sum payment or, at the option of the
Corporation, in equal monthly or other regular intervals, as
adjusted for periodic changes in the applicable interest rate,
over a period of time, not to exceed ten (10) years, commencing
ninety (90) days following the Participant's termination of
employment.

- 2 -

<PAGE>

4.4 Distribution in the Event of Permanent Incapacity or Death - In
the event of a Participant's permanent incapacity or death before
the Participant has received any or all of the deferred payments
to which the Participant is entitled, the remaining Aggregate
Value of the Recipient's Account will be paid in the form of a
lump-sum payment.

4.5 All such payments will be made to Participant while living and, in
the event of Participant's death, in accordance with Participant's
written election.

ARTICLE V

Election to Defer Compensation

5.1 Number of Elections - There may be only one election for each
Earning Period.

5.2 Revocability of Election - Once an election is made in writing for
a particular Earning Period, the election cannot be revoked or
changed.

5.3 Time of Election - The election for each Earning Period must be
made on or before May 1 of the applicable Earning Period.

5.4 Manner of Election - A Participant may elect to defer compensation
by giving written notice to the Plan administrator on a form
provided by the Corporation. The Participant will be required to
provide the following information:

1. amount to be deferred; and
2. the beneficiary or beneficiaries in the event of the
Participant's death.

ARTICLE VI

Administration and Amendment of Plan

6.1 Administration - The Plan shall be administered by the
Compensation Committee of the Board of Directors or other
committee designated or administrator appointed for such purpose
by the Board of Directors (the "Committee"). The Committee shall
have plenary authority to interpret the Plan, to decide all
questions of fact arising under the Plan, to formulate rules and
regulations covering the operation of the Plan, and to make all
other determinations necessary or desirable in the administration
of the Plan. The decision of the Committee on any questions
concerning or involved in the interpretation or administration of
the Plan shall be final and conclusive.

6.2 Maintenance of Account - The maintenance of each Account will be
the responsibility of the Chief Financial Officer. A statement
will be sent to each Participant advising them of the Aggregate
Value as of the end of each fiscal year.

6.3 Amendment of Plan - The Plan may at any time be amended, modified
or terminated by the Committee. No amendment, modification or
termination shall, without the consent of the Participant,
adversely affect the accruals in the Participant's account.

- 3 -

<PAGE>

ARTICLE VII

Miscellaneous

7.1 Assignability - Neither Participant, Participant's estate, nor any
beneficiary shall have any power to assign or encumber the right
to receive payments under the Plan, and any attempted assignment
or encumbrance thereof shall be null and void.

7.2 Participant's Interest in Undistributed Aggregate Value - The
right of any Participant to receive future installments under the
provisions of the Plan will be an unsecured claim against the
general assets of the Corporation. The Corporation's promise to
pay the Aggregate Value of the Account will be a contractual
obligation that is not evidenced by notes or secured in any way.

- 4 -

Exhibit 10(f)

JACOBSON STORES INC.

1999
Management Incentive Plan

Senior management incentives are based on accomplishing the key goals of our
business plan. Incentives are structured to strive for excellence.

The management incentive plan is designed to:

o foster an awareness of the Company's objective of consistent,
profitable operation.

o motivate senior management to meet the shorter term needs of
shareholders without sacrificing long-term profitability.

o encourage senior management to "stretch" for higher levels of
performance in the future.

o establish target incentives for each participant so that each person
is aware of what payout percentages can be expected with various
levels of accomplishment.

o encourage retention of key employees.

The principal features of the plan include:

o participation limited to salaried officers of the Company.

o specific performance criteria and weightings established at the
beginning of the year for each participant (at the most senior level,
primary emphasis placed on corporate goal achievement; at the VP-Staff
level, primary emphasis placed on individual goal achievement).

o potential payout as a percent of the base salary of each participant
as follows:

Threshold Target Maximum
--------- ------ -------
Chairman/CEO/President 0% 35% 52.2%
Vice Chairman 0 30 45
EVP - Marketing & Stores 0 30 45
SVPs 0 25 37.5
VP - Regional Director of Stores 0 20 30
VP - DMM 0 20 30
VP - Operations 0 20 30
VP - Staff Positions 0 15 22.5

o Threshold corporate performance criteria (announced at the beginning
of the year) to be achieved before any payout is made under the plan.

(3/25/99)

EXHIBIT 23

ARTHUR ANDERSEN LLP

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Form S-8 Registration Statements File Nos. 033-53469, 333-31989 and 333-59031
and Form S-2 File No. 33-10532.

/s/ Arthur Andersen LLP
----------------------------
ARTHUR ANDERSEN LLP

Detroit, Michigan
April 9, 1999

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
FOR THE YEAR ENDED JANUARY 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-30-1999
<PERIOD-TYPE> YEAR
<CASH> 2,929
<SECURITIES> 0
<RECEIVABLES> 32,749
<ALLOWANCES> 598
<INVENTORY> 90,454
<CURRENT-ASSETS> 131,798
<PP&E> 177,864
<DEPRECIATION> 92,875
<TOTAL-ASSETS> 236,875
<CURRENT-LIABILITIES> 55,704
<BONDS> 99,803
<COMMON> 5,975
0
0
<OTHER-SE> 64,962
<TOTAL-LIABILITY-AND-EQUITY> 236,875
<SALES> 444,305
<TOTAL-REVENUES> 444,305
<CGS> 295,272
<TOTAL-COSTS> 295,272
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 885
<INTEREST-EXPENSE> 7,915
<INCOME-PRETAX> 2,515
<INCOME-TAX> 880
<INCOME-CONTINUING> 1,635
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,635
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28

</TABLE>