VALUE CITY DEPARTMENT STORES INC /OH, DEF 14A, 1996-11-01

VALUE CITY DEPARTMENT STORES INC /OH
DEF 14A, 1996-11-01
VARIETY STORES

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<PAGE> 1

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SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant /X/

Filed by a Party other than the Registrant / /

Check the appropriate box:

<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>

XXXXX
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

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<PAGE> 2
VALUE CITY DEPARTMENT STORES, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
DECEMBER 3, 1996
AND
PROXY STATEMENT

IMPORTANT

Please mark, sign and date your proxy and promptly return it in the
enclosed envelope. No postage is necessary if mailed in the United
States.

<PAGE> 3

VALUE CITY DEPARTMENT STORES, INC.
3241 Westerville Road
Columbus, Ohio 43224
614-471-4722

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

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 3, 1996

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

November 4, 1996

To the Shareholders of
Value City Department Stores, Inc.:

NOTICE IS HEREBY GIVEN that the Sixth Annual Meeting of Shareholders of
Value City Department Stores, Inc., an Ohio corporation (the "Company"), will be
held at the Hyatt on Capitol Square, 75 East State Street, Columbus, Ohio, on
Tuesday, the third day of December, 1996, at 10:00 a.m., local time, for the
following purposes:

1. To elect nine directors, each for a term of one year and until their
successors are duly elected and qualified.

2. To approve an amendment increasing the number of common shares
available for issuance under the Company's 1991 Stock Option Plan from 1,800,000
shares to 2,500,000 shares.

3. To approve an amendment increasing the number of common shares
available for issuance under the Company's Non-Employee Director Stock Option
Plan from 50,000 shares to 130,000 shares.

4. To transact such other business as may properly come before the
meeting or any adjournment thereof.

Whether or not you plan to attend the meeting, please date, sign and
mail the enclosed proxy in the envelope provided. If you attend the meeting, you
may vote in person, and your proxy will not be used.

By Order of the Board of Directors

Robert M. Wysinski
Senior Vice President, Chief Financial Officer,
Treasurer and Secretary

<PAGE> 4

VALUE CITY DEPARTMENT STORES, INC.

November 4, 1996

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

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 3, 1996

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

INTRODUCTION

This Proxy Statement is furnished to the shareholders of Value City
Department Stores, Inc., an Ohio corporation (the "Company"), in connection with
the solicitation by the Board of Directors of the Company of proxies to be used
at the Sixth Annual Meeting of Shareholders to be held on December 3, 1996, at
10:00 a.m., local time, at the Hyatt on Capitol Square, 75 East State Street,
Columbus, Ohio, and at any adjournment thereof. It is being mailed to the
shareholders on or about November 4, 1996.

All shares represented by properly executed proxies received by the
Company prior to the meeting will be voted in accordance with the shareholder's
directions or, in the absence of instructions to the contrary, will be voted FOR
each of the proposals herein. A proxy may be revoked, without affecting any vote
previously taken, by written notice mailed to the Company (attention Robert M.
Wysinski, Secretary) or delivered in person at the meeting, by filing a duly
executed, later dated proxy, or by attending the meeting and voting in person.

Shareholders of record at the close of business on October 29, 1996,
are entitled to notice of and to vote at the Annual Meeting and any adjournment
or adjournments thereof. At October 29, 1996, the Company had outstanding
31,715,745 Common Shares, net of Treasury shares, without par value, entitled to
vote at the Annual Meeting. Each Common Share entitles the holder thereof to one
vote upon each matter to be voted upon by shareholders at the Annual Meeting.

The presence, in person or by proxy, of a majority of the outstanding
Common Shares of the Company is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. Abstentions and broker non-votes
are counted for purposes of determining the presence or absence of a quorum.
Broker non-votes occur when brokers, who hold their customers' shares in street
name, sign and submit proxies for such shares and vote such shares on some
matters, but not others. Typically, this would occur when brokers have not
received any instructions from their customers, in which case the brokers, as
the holders of record, are permitted to vote on "routine" matters, which
typically include the election of directors, but not on non-routine matters.

The election of each director nominee requires the favorable vote of a
plurality of all votes cast by the holders of Common Shares at a meeting at
which a quorum is present. Proxies that are marked "Withhold Authority" and
broker non-votes will not be counted toward such nominee's achievement of a
plurality and thus will have no effect. Each other matter to be submitted to the
shareholders for approval or ratification at the Annual Meeting requires the
affirmative vote of the holders of a majority of the Common Shares voting on the

<PAGE> 5

matter. For purposes of determining the number of Common Shares voting on the
matter, abstentions will be counted and will have the effect of a negative vote;
broker non-votes will not be counted and thus will have no effect.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

OWNERSHIP OF COMMON SHARES

The following table sets forth, as of October 29, 1996, certain
information with regard to the beneficial ownership of the Company's Common
Shares by each holder of 5% of such shares, each director individually and all
officers and directors as a group.
<TABLE>
<CAPTION>

Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Outstanding Shares (2)
- ---------------- ------------------------ ----------------------

<S> <C> <C>
Jon P. Diamond (3) 21,700 *
George A. Iacono (4) 153,936 *
Richard Gurian 9,300 *
Dr. Norman Lamm 11,300 *
Geraldine Schottenstein (5)(6)(7) 39,000 *
Jay L. Schottenstein (5)(6)(7) 124,736 *
Saul Schottenstein (5)(6) 59,000 *
Robert L. Shook 17,000 *
Robert M. Wysinski (4) 38,387 *
All directors and officers as a group
(20 persons)(4)(5)(6) 668,453 2.1%
Schottenstein Stores Corporation (6) 20,568,334 64.9%
- --------------
<FN>
* Represents less than 1% of outstanding Common Shares, net of Treasury Shares.

(1) Except as otherwise noted, the persons named in this table have sole
power to vote and dispose of the shares listed and includes the number of
Common Shares, if any, as to which the named person has the right to
acquire beneficial ownership upon the exercise of stock options
exercisable within 60 days of October 29, 1996.
(2) The percent is based upon the 31,715,745 Common Shares outstanding, net
of Treasury Shares at October 29, 1996.
(3) Includes 2,000 shares held by Mr. Diamond's wife.
(4) Includes 132,336 shares for Mr. Iacono, 20,587 shares for Mr. Wysinski
and 197,552 shares for all directors and executive
officers as a group, which are owned subject to a risk of forfeiture on
termination of employment with vesting over a period of years pursuant to
the terms of Restricted Stock Agreements with the Company.
(5) Does not include the 20,568,334 Common Shares owned by Schottenstein
Stores Corporation ("SSC") of 1800 Moler Road, Columbus, Ohio 43207.
Jay L. Schottenstein is the Chairman and Chief Executive Officer of SSC.
Jay L. Schottenstein, Saul Schottenstein and Geraldine Schottenstein
are members of the Board of Directors of SSC. See "Ownership of SSC,"
below.
(6) Does not include 359,445 Common Shares owned by El-An Foundation, a
private charitable foundation, and 1,312,500 Common Shares owned by GB
Stores, a Pennsylvania limited partnership. Combined, the shares owned by
El-An Foundation and GB Stores represent 5.3% of the Company's
outstanding Common Shares. SSC owns a 96% limited partnership interest in
GB Stores and its corporate general partner is an affiliate of SSC. The
sole members, trustees and officers of the El-An Foundation are Saul
Schottenstein and Jay Schottenstein.
(7) Includes 30,000 shares as to which Geraldine Schottenstein and Jay L.
Schottenstein share voting and investment power as trustees of a trust
which owns the shares. Geraldine Schottenstein is also a beneficiary
of the trust.
</TABLE>

4
<PAGE> 6

OWNERSHIP OF SSC

The following table indicates the shares of SSC common stock beneficially
owned by each nominee for election to the Board of Directors of the Company and
by all directors and officers of the Company as a group, as of October 29, 1996:

SHARES OF SSC PERCENT
COMMON STOCK OF CLASS
------------ --------

<S> <C> <C>
Jay L. Schottenstein (1) 299.32766 78.4%

Geraldine Schottenstein (2) 27.41707 7.2%

Jon P. Diamond (3) 27.41707 7.2%

Directors and officers as a group 354.1619 92.8%
<FN>

(1) Represents sole voting and investment power over 299.32766 shares held in
irrevocable trusts for family members as to which Jay L. Schottenstein is
trustee and as to which shares Mr. Schottenstein may be deemed to be the
beneficial owner.
(2) Represents sole voting and investment power over 27.41707 shares held by
Geraldine Schottenstein as trustee of an irrevocable trust for family
members as to which shares Geraldine Schottenstein may be deemed to be the
beneficial owner.
(3) Represents sole voting and investment power over 27.41707 shares held by
Susan Schottenstein Diamond, the wife of Jon Diamond, as trustee of an
irrevocable trust for family members, as to which shares Mr. Diamond may be
deemed to be the beneficial owner.
</TABLE>

<PAGE> 7

PROPOSAL ONE: ELECTION OF DIRECTORS

The members of the Board of Directors (the "Board") of the Company are
elected at the Annual Meeting. The number of members of the Board has been fixed
at nine by action of the Board pursuant to the Code of Regulations (By-laws) of
the Company. Board members serve until the annual meeting following their
election or until their successors are duly elected and qualified.

NOMINEES FOR ELECTION AS DIRECTORS

The enclosed proxy, if returned duly executed and not revoked, will be
voted as specified thereon, or if no instructions are given, will be voted FOR
the nominees listed below. In the event that any nominee should become
unavailable, the Board of Directors may decrease the number of directors,
pursuant to the Code of Regulations, or may designate a substitute nominee, in
which event the proxy will be voted for such substitute nominee. The Board has
no reason to believe that any nominee will be unavailable or, if re-elected,
unable to serve. Each of the nominees became a director of the Company at the
time it was organized in April 1991, except for Geraldine Schottenstein, who
became a director in April 1992, and George A. Iacono and Robert M. Wysinski,
who were elected in December 1993.

The following table sets forth certain information with respect to each
nominee.
<TABLE>
<CAPTION>

NAME AGE PRINCIPAL OCCUPATION
- ---- --- --------------------
<S> <C> <C>
Jay L. Schottenstein 42 Chairman of the Company, American Eagle Outfitters, Inc. and SSC since March
1992 and Chief Executive Officer of the Company since April 1991. Mr. Schottenstein
served as Vice Chairman of the Company from April 1991 to March 1992, Vice Chairman
of SSC from 1986 until March 1992, and a director of SSC since 1982(1). He served
SSC as President of the Furniture Division from 1985 through June 1993 and in various
other executive capacities since 1976.

Saul Schottenstein 74 Vice Chairman of the Company since April 1991. Mr. Schottenstein has served as
President of SSC since 1984, a director of SSC since 1982 and served SSC and its
predecessors in various executive capacities since 1946(1).

Geraldine Schottenstein 63 Director of the Company and SSC since April 1992. She has served as a volunteer
and board member for a variety of charitable and community
organizations for more than the past five years.

Jon P. Diamond 39 Executive Vice President and Chief Operating Officer of Safe Auto Insurance
Company, a property and casualty insurance company, since March 1993.
Mr. Diamond has served as Vice President of SSC from March 1987 to
March 1993 and served SSC in various management positions since 1983(1).

George A. Iacono 55 President and General Merchandise Manager of the Company since April 1991.
He served as President of SSC's Department Store Division (the "Division"), the
predecessor of the Company, since May 1989, served as Senior Vice President -
Merchandising of the Division since November 1985, and upon joining the Division
in May 1984, served as Senior Vice President - General Merchandise Manager and
Vice President - Ladies Apparel. Before joining SSC, Mr. Iacono served as Vice
President/General Merchandise Manager and held other merchandising
positions with Marshalls, Inc. since 1976.
</TABLE>

<PAGE> 8

<S> <C> <C>
Robert M. Wysinski 48 Senior Vice President, Chief Financial Officer, Treasurer and Secretary
of the Company since April 1991 and served as Vice President of SSC from June
1987 until June 1991, and as Treasurer of SSC from June 1986 until June 1991.
Prior to that time, he served as Assistant Secretary and Assistant Treasurer
and in a variety of positions in the finance area since joining SSC in 1973.

Richard Gurian 78 President of Richard Gurian Consultants, Inc., formerly Venture Horizons,
Inc., since 1980.

Dr. Norman Lamm 68 President of Yeshiva University, New York, New York, since 1976.

Robert L. Shook 58 Author of business-related books since 1978.
<FN>

(1) SSC is a controlling shareholder of the Company. For information
with respect to the beneficial ownership of the voting stock of SSC
by nominees for election to the Board of the Company and beneficial
ownership of Common Shares of the Company by such persons and
officers of the Company. See "Security Ownership of Certain
Beneficial Owners and Management." Geraldine Schottenstein is
the mother of Jay L. Schottenstein, the sister-in-law of Saul
Schottenstein and the mother-in-law of Jon P. Diamond.
</TABLE>

Jay L. Schottenstein and Saul Schottenstein are directors of the Valley
Fair Corporation and American Eagle Outfitters, Inc., each of which is a company
with a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934.

INFORMATION CONCERNING BOARD OF DIRECTORS

During the fiscal year ended August 3, 1996, the Board met twice and
acted by unanimous written consent three times.

The Board has standing Audit and Stock Option Committees.

The members of the Audit Committee are Richard Gurian, Dr. Norman Lamm
and Robert L. Shook. Its function is to recommend to the Board a firm of
accountants to serve as the Company's auditors and to review with the
independent auditors and the appropriate corporate officers matters relating to
corporate financial reporting and accounting procedures and policies, adequacy
of financial, accounting and operating controls, and the scope of the audit. The
Audit Committee met four times in fiscal 1996. Dr. Norman Lamm participated in
all but one of the meetings.

The members of the Stock Option Committee are Richard Gurian, Dr.
Norman Lamm and Robert L. Shook. Its function is to recommend to the Board the
number and terms of any stock options to be granted under the Company's stock
option plan. The committee met seven times in fiscal 1996.

Directors who are not employees are paid $2,000 for each Board and
Committee meeting attended, with a minimum annual compensation of $8,000, and
are automatically granted options each quarter to purchase 1,000 Common Shares
of the Company pursuant to the Non-employee Director Stock Option Plan described
under "Proposal Three." Directors who are also employees of the Company do not
receive additional compensation for serving as directors.

OFFICERS AND KEY EMPLOYEES

The following persons are officers of the Company. Except as otherwise
indicated, each was elected to the position indicated with the Company in April
1991. For information regarding officers who are also directors, see "Election
of Directors." The officers of the Company are elected annually by the Board and
serve at the pleasure of the Board.

<PAGE> 9

Donald R. Andrus, age 52, Senior Vice President and Chief Operating
Officer. Mr. Andrus was appointed Senior Vice President and Chief Operating
Officer of the Company upon joining the Company in September 1995. Prior to that
time, Mr. Andrus was Chairman and Chief Operating Officer of Foley's, a
division of May Department Stores. Mr. Andrus also held various other senior
management positions for certain divisions of the May Co.

Garry L. Thibodeau, age 55, Vice President - Operations. Mr. Thibodeau was
appointed Vice President - Operations of the Division in June 1987, having
served as Regional Manager since joining the Division in 1985. Mr. Thibodeau
served as Regional Merchandise Manager and District Manager of Marshalls, Inc.
from 1980 until 1985.

Herbert E. Minkin, age 56, Vice President - Human Resources. Mr. Minkin was
appointed Vice President - Human Resources of SSC in August 1985 and had served
as Personnel Director of the Division since 1973.

Robert Tavenner, age 53, Vice President - Loss Prevention. Mr. Tavenner
became Vice President Loss Prevention of the Division in November 1989. He
served as Director of Loss Prevention of the Division since joining SSC in
November 1988. Prior to joining SSC, Mr. Tavenner served as Vice President of
Loss Prevention and Internal Audit for Gold Circle Stores, Inc., a division of
Federated Stores, Inc., since 1978.

Denis G. Fredrick, age 52, Vice President - Management Information Systems.
Mr. Fredrick became Vice President - Management Information Systems of the
Division in December 1989. Prior to that time, Mr. Fredrick served as Director
of Management Information Systems of the Division since joining SSC in December
1988. Prior to joining SSC, Mr. Fredrick served as Vice President - Management
Information Systems of Talbots, Inc., a women's specialty retailer and catalog
chain.

Richard L. Walters, age 44, Vice President - Controller, Chief Accounting
Officer, Assistant Treasurer and Assistant Secretary. Mr. Walters became Vice
President of the Company in April 1992, Assistant Secretary of the Company in
June 1991, Assistant Treasurer of the Division in August 1990 and Controller of
the Division in June 1986. Prior to that time, Mr. Walters served as Accounting
Manager for the Division since September 1985 and in a variety of other
accounting positions since joining SSC in 1979.

Daniel P. Reilly, age 51, Vice President - Distribution and Transportation
Services. Mr. Reilly joined the Company in April 1995 as Vice President of
Distribution and Transportation Services. Prior to joining the Company, Mr.
Reilly served as Vice President of Distribution and Transportation Services for
Consolidated Stores Inc., an off-price retailer, from September 1989 to April
1995. Mr. Reilly served as a General Manager of Distribution for Marshalls Inc.,
since 1976.

Dennis O'Malley, age 52, Vice President - Merchandise Control. Mr.
O'Malley joined the Company in March of 1995. Prior to that time Mr. O'Malley
served in a variety of capacities, including Vice President of Store Planning,
Vice President of Merchandise Control and Controller, for Marshalls Inc..

Richard J. Giordano, age 53, Vice President - Distribution Apparel. Mr.
Giordano became Vice President - Distribution Apparel of the Company in November
1994. Prior to joining the Company, Mr. Giordano served as Director of
Distribution Services for Marshalls Inc., from 1975 to 1994.

Mark Heitin, age 44, joined the company in April of 1996 as Vice President
- - Merchandise Planning and Allocation. Previously he was Vice President of
Merchandise Planning for American Eagle Outfitters for approximately two years.
Prior to that time he held various merchandising positions during an 18 year
tenure with Marshalls, Inc., including Vice President of Planning & Allocation.

<PAGE> 10

Myrna Reiss, age 46, joined the Company in August 1996 as Vice
President - Advertising. Prior to that, Ms. Reiss served as Vice President
Creative and Visual Advertising for Filene's Basement, an off-price retailer.
Her tenure there was from 1985 to 1996. Ms. Reiss' experience preceding that
includes various positions in Advertising at divisions of Allied, Macy's and
Federated Department Stores.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who are beneficial owners of more than
ten percent of the Company's Common Stock ("reporting persons") to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. Reporting persons are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms filed
by them. Based on its review of the copies of Section 16(a) forms received by
it, the Company believes that, during fiscal year 1996, all filing requirements
applicable to reporting persons were complied with.

<PAGE> 11

EXECUTIVE OFFICER COMPENSATION

The following table sets forth certain information regarding
compensation paid during each of the Company's last three fiscal years to the
Company's Chief Executive Officer and to each of the Company's other four most
highly compensated executive officers.
<TABLE>
<CAPTION>

SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION ----------------------
------------------- RESTRICTED
NAME AND FISCAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS AWARDS(2) SARS(#)(3) COMPENSATION(4)
- ------------------ ---- --------- ----- --------- ---------- ---------------

<S> <C> <C> <C> <C> <C> <C>
Jay L. Schottenstein(5) 1996 $250,000 None None None ---
Chairman and Chief 1995 $250,000 None None 150,000 ---
Executive Officer 1994 $250,000 None None 30,000 ---

George A. Iacono(6) 1996 $350,000 $300,000 None None $10,216
President and General 1995 $350,000 $327,000 None 39,000 $11,833
Merchandise Manager 1994 $300,000 $275,000 None None $10,219

Saul Schottenstein 1996 $250,000 None None None ---
Vice Chairman 1995 $250,000 None None 45,000 ---
1994 $250,000 None None 5,000 ---

Robert M. Wysinski 1996 $226,667 $85,000 None None $7,996
Senior Vice President 1995 $226,667 $49,583 None 32,000 $9,058
Chief Financial Officer 1994 $215,000 $71,500 None None $8,450
and Secretary

Donald R. Andrus(7) 1996 $393,750 $50,000 None None $70,516
Senior Vice President 1995 N/A N/A N/A N/A N/A
Chief Operating Officer 1994 N/A N/A N/A N/A N/A

<FN>

(1) Includes amounts deferred by the executive officer pursuant to SSC's
Associates Profit Sharing and 401(k) Plan (the "401(k) Plan"), which was
adopted effective as of August 1, 1989, and in which associates of the
Company are eligible to participate. The 401(k) Plan is a prototype defined
contribution plan that qualifies for favorable tax treatment under Sections
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended. The
401(k) Plan permits eligible associates of the Company to contribute a
percentage of their pre-tax wages to the plan and the Company will match
the contributions up to a maximum of 3% of covered wages. The Company also
may contribute up to an additional 1.5% of covered wages as a profit
sharing contribution.
(2) The number and value (in thousands of dollars) of aggregate restricted
stock holdings of each of the named executives on August 3, 1996 was: Mr.
Jay Schottenstein, None; Mr. Iacono, 132,336 shares ($1,323); Mr. Saul
Schottenstein, None; Mr. Wysinski, 20,587 shares ($206) and Mr. Andrus,
None. The value of the restricted stock is determined by multiplying the
total shares held by each named executive by the closing price on the New
York Stock Exchange on August 3, 1996 ($10.00).
(3) The number of options granted in fiscal 1995 includes options granted in
prior years which were repriced during fiscal 1995.
(4) Represents amounts contributed by the Company to the 401(k) Plan, including
both matching contributions and any profit- sharing contributions, and the
value of Company paid life insurance. The amount of 401(k) Plan
contributions for fiscal 1996 was: Mr. Jay Schottenstein, None; Mr. Iacono,
$3,750; Mr. Saul Schottenstein, None; Mr. Wysinski, $3,750; and, Mr.
Andrus, None. The balance for Mr. Iacono and Mr. Wysinski represents the
value of Company paid life insurance. The balance for Mr. Andrus represents
relocation reimbursements of $25,535, tax reimbursements of $28,976 and the
remainder for auto and insurance allowances.
(5) Jay L. Schottenstein is also Chairman of SSC and American Eagle Outfitters,
Inc. He does not devote his full business time to the business of the
Company.
(6) George A. Iacono has entered into an employment agreement with the Company
for a term ending June 4, 1997. The agreement provides for an annual salary
of $250,000, through June 4, 1992 increasing to $300,000 thereafter,
together with a bonus in the discretion of the Chairman. The agreement also
provides for a severance payment equal to $15,625 per month for the
remaining term of the agreement in the event that the Company terminates
Mr. Iacono's employment, with or without cause. Mr. Iacono's base was
increased to $350,000 in fiscal 1995.
(7) Mr. Andrus joined the Company on September 18, 1995 and entered into an
employment agreement with the Company for a term ending on September 18,
1997. The agreement provides for an annual salary of $450,000, annual
car allowance of $16,000 and annual stock options for 10,000 shares at
the completion of each year of employment. Minimum guaranteed bonuses
are $160,000 in the first year and $125,000 in the second year.
</TABLE>

<PAGE> 12

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE

None of the executive officers named in the Summary Compensation Table
exercised options during the 1996 fiscal year. The following table provides
certain information on the number and value of stock options held by the
executive officers named in the Summary Compensation Table at August 3, 1996.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES VALUE AT FISCAL YEAR END (#) FISCAL YEAR END ($) (1)
ACQUIRED ON REALIZED ---------------------- -----------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>

Jay L. Schottenstein --- --- 72,000 78,000 $139,700 $151,300

George A. Iacono --- --- 19,800 19,200 $38,400 $37,250

Saul Schottenstein --- --- 34,000 11,000 $66,000 $21,350

Robert M. Wysinski --- --- 16,400 15,600 $31,800 $30,250

Donald R. Andrus --- --- --- --- --- ---

<FN>

(1) Represents the total gain which would be realized if all in-the-money
options held at year end were exercised, determined by multiplying the
number of shares underlying the options by the difference between the per
share option exercise price and the per share fair market value at year end
of $10.00. An option is in-the-money if the fair market value of the
underlying shares exceeds the exercise price of the option.
</TABLE>

<PAGE> 13

The following Board of Directors' Compensation Report and Performance
Graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any of the
Company's filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.

COMPENSATION REPORT OF THE BOARD OF DIRECTORS

General. The key components of the Company's executive officer
compensation include both short-term compensation consisting of annual base
salary and annual bonuses and long-term, equity based compensation
consisting of grants of restricted stock and stock option awards. The
Company does not have a Compensation Committee. The Board of Directors has
delegated to the Chairman of the Board the authority to establish the
annual compensation of the officers of the Company, other than the
Chairman's compensation, as permitted under Ohio law. The full Board of
Directors has made the only grants of restricted stock by the Company. The
Stock Option Committee of the Board of Directors grants options under the
Company's 1991 Stock Option Plan.

Chief Executive Officer's Compensation. The Chairman and Chief
Executive Officer's annual base salary was fixed by action of the Board of
Directors at the time he was appointed Chairman during fiscal 1992. The
Chairman does not receive an annual bonus. The Board of Directors did not
consider or take any action to change the Chairman's annual base salary
during fiscal 1996.

Executive Officers' Compensation. The President's bonus and the
remaining executive officers' base salaries and bonuses for fiscal 1996
were determined by the Chairman after consultation with the President and
discussion with each individual officer. The determination of salaries and
bonuses was based primarily on subjective factors, such as the Chairman's
perception of individual performance, the individual's contribution to the
overall performance of the Company and the anticipated value of the
individual's contribution to the Company's future performance. The
determination was not based on specific objective criteria. No specific
weight was given to any of the factors considered.

Stock Awards. The Company's 1991 Stock Option Plan was adopted at the
time the Company went public in 1991 for the purpose of providing long-term
incentives to key employees and motivating key employees to improve
performance of the Company's stock. Stock options granted under the
Company's 1991 Stock Option Plan are determined, and the 1991 Stock Option
Plan is administered, by the Stock Option Committee, none of whose members
are officers or employees of the Company and none of whom are eligible to
receive stock options under the 1991 Stock Option Plan. In determining the
size of a stock option award, the Stock Option Committee considers the
total number of shares subject to previously granted stock options held by
the individual and, based principally on the recommendation of the senior
executive officers, the anticipated value of an individual's contribution
to the Company's future performance. The options granted during fiscal year
1996 were granted to employees as a long-term incentive designed to
encourage them to remain with the Company.

Jay L. Schottenstein Saul Schottenstein Geraldine Schottenstein
Jon P. Diamond Robert M. Wysinski George A. Iacono
Robert L. Shook* Dr. Norman Lamm* Richard Gurian*

- -----------------
* Members of the Stock Option Committee.

<PAGE> 14

PERFORMANCE GRAPH

The following graph shows the percentage change in the cumulative total
return performance to holders of the Company's Common Shares with that of
the Standard & Poor's General Merchandise Chains Index and the Russell 2000
Index, both of which are published indexes. This comparison includes the
period beginning July 27, 1991 through August 3, 1996. The Standard &
Poor's General Merchandise Chains Index is published weekly in the
Standard & Poor's Statistical Service and the index value preceding each
fiscal year end has been selected for purposes of this comparison. The
Russell 2000 Index is a capitalization weighted index of domestic equity
securities traded on the New York and American Stock Exchanges and the
NASDAQ which excludes the 1,000 largest capitalization equity securities
of the 3,000 such equity securities. The Company's Common Shares are
traded on the New York Stock Exchange. The comparison of the cumulative
total returns for each investment assumes that $100 was invested on July
27, 1991 and that all dividends were reinvested. The Company's
performance has been adjusted for a 2 for 1 stock split effective December
2, 1991.

<TABLE>
<CAPTION>
VALUE CITY S & P RETAIL
DEPARTMENT STORES, INC. RUSSELL 2000 (GENERAL MERCHANDISE)
<S> <C> <C> <C>
7/91 100 100 100
7/92 129 115 117
7/93 147 142 121
7/94 123 148 119
7/95 76 185 133
7/96 90 198 128

</TABLE>

<PAGE> 15

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Jay L. Schottenstein, Saul Schottenstein and George A. Iacono each of
whom is an executive officer of the Company, are also members of the
Company's Board of Directors. As stated, the Company's Chairman, Jay L.
Schottenstein, with the input of its President, George A. Iacono,
determined the annual salary and bonus compensation of the officers of the
Company, other than the Chairman's, and such determination was not formally
considered and ratified by the Board of Directors. Jay L. Schottenstein is
also Chairman and Chief Executive Officer of SSC. For information regarding
the relationships between the Company and SSC, see "Relationship With SSC
And Its Affiliates" below.

The Stock Option Committee administers and grants options under the
Company's 1991 Stock Option Plan. The Stock Option Committee consists of
Messrs. Gurian, Lamm and Shook. None of the members of the Committee are
present or former officers of the Company or are themselves or have
affiliates that are parties to agreements with the Company.

RELATIONSHIP WITH SSC AND ITS AFFILIATES

Prior to the completion of its initial public offering on June 18,
1991, the Company was operated as the Department Store Division of SSC. On
that date, SSC transferred substantially all of the net assets of the
Division to the Company in exchange for 22,500,000 Common Shares of the
Company. At October 29, 1996, SSC owned 64.9% of the Company's outstanding
Common Shares. So long as SSC owns more than 50% of the Company's voting
shares, it will continue to have the power acting alone to approve any
action requiring a vote of the majority of the voting shares of the Company
and to elect all of the Company's directors. For information with respect
to the beneficial ownership of the voting stock of SSC by nominees for
election to the Board of the Company and beneficial ownership of Common
Shares of the Company by such persons and officers of the Company, see
"Security Ownership of Certain Beneficial Owners and Management."

REAL ESTATE LEASES AND SUBLEASES

The Company leases or subleases from SSC or affiliates of SSC
thirty two store locations and all of its warehouse and office facilities.
Generally, the agreements require the Company to pay for insurance, taxes,
common area maintenance and other costs associated with the properties on a
"triple net" basis for freestanding locations, and on a pro rata share
basis for locations that are part of a larger parcel.

SSC leases to the Company 14 store locations and two
warehouse/office locations and a fixture shop under the terms of two Master
Lease Agreements. The Master Store Lease, as amended, provides for certain
base rentals which approximate $1.93 per square foot and the Master
Warehouse Lease, as amended, provides for specified rent which approximates
$1.10 per square foot. Beginning in fiscal 1992, the Master Store Lease
also provides for the payment of percentage rent by the Company equal to 3%
of the amount by which total sales, including sales of licensees ("Total
Sales"), for all of the 14 stores exceed the Total Sales for such stores in
fiscal 1991. For fiscal 1996, the Company recorded expense to SSC,
including contingent rent, of $3,308,983 pursuant to the Master Store Lease
and $662,416 pursuant to the Master Warehouse Lease.

SSC subleases to the Company three store locations that are owned
by affiliates of SSC under a Master Sublease. The Master Sublease provides
for an annual base rent of $1.148 per square foot. Beginning in fiscal
1992, the Master Sublease also provides for the payment of percentage rent
by the Company equal to 3% of the amount by which Total Sales for all of
the three stores exceed the aggregate Total Sales for such stores in fiscal
1991. For fiscal 1996 the Company recorded expense to SSC, including
contingent rent, of $640,439 pursuant to the Master Sublease.

<PAGE> 16

Both Master Leases have a term of five years which began in June
1991, and are renewable thereafter, by individual location, at the option
of the Company, for five additional renewal terms of five years each. The
Company exercised the first renewal to extend both Master Leases during
fiscal 1996. This extension causes both Master Leases to expire on July 31,
2001 with four five-year renewal terms remaining for each leased location.
The Master Sublease provides for an initial five-year term which began in
June 1991 and is renewable for generally at least five additional renewal
terms of five years each, by individual locations, at the option of the
Company. The Company has exercised renewals for each store under the Master
Sublease to cause the Master Sublease terms to expire between May 31, 2001
and September 30, 2002 resulting in four five-year renewal terms remaining.
Each renewal term in the aforementioned leases and subleases will be on the
same terms as the initial term, except for rent. For fiscal 1997 through
2001, the Master Store Lease and Master Sublease provide for a minimum
percentage rent of $1.00 per square foot. For each succeeding five-year
renewal term, the minimum percentage rent will increase by $0.50 per square
foot. In no event, commencing fiscal 1997, shall total rent be less than 2%
of Total Sales. The Master Warehouse Lease provides for additional rent of
$0.85 per square foot for fiscal years 1997 through 2001 and an additional
$0.30 per square foot for each succeeding five-year renewal term.

The Company also leases or subleases six warehouse facilities and a
trailer yard from SSC or affiliates of SSC. The warehouse facilities
consist of approximately 1,258,000 square feet for rents of $1.50 to $4.03
per square foot with lease control ranging from 2001 through 2012.
Generally, the lease renewal terms are at the same terms and conditions as
the original term except rent which increases by $0.25 to $0.50 per square
foot for the renewal terms. During fiscal 1996, the Company closed three
temporary warehouses consisting of approximately 120,000 square feet. The
Company also leases, from an affiliate of SSC, a trailer yard of
approximately 19 acres with lease control through April 2009 having rents
that range from $25,000 to $30,000 per year during the period of lease
control. During fiscal 1996, the Company recorded expenses in the aggregate
to SSC and affiliates of SSC of $4,010,378 pursuant to these leases and
assignments.

Additionally, the Company leases nine store locations from SSC or
affiliates of SSC, two of which were opened in fiscal 1996. Generally, the
leases provide for percentage rent equal to 2% of Total Sales in excess of
a specified sales level or base rent with base rents ranging from $2.25 to
$6.00 per square foot for the initial term and provide lease control
ranging from 2001 through 2036. Generally, the renewal terms are at the
same terms and conditions as the original term except rent which may
increase for the renewal terms. During fiscal 1996, the Company recorded
expenses in the aggregate to SSC and affiliates of SSC of $4,678,083
pursuant to these leases.

During fiscal 1996, the Company leased one additional store from an
affiliate of SSC. The lease expires January 31, 2007 and provides for
percentage rent equal to 2% of Total Sales subject to a minimum rent of
$4.75 per square foot with six additional renewal options of five years
each. For fiscal 1996, the Company recorded expenses to this affiliate of
$125,522 for this lease.

In addition to the foregoing, SSC subleases one store location to
the Company under an agreement that provides for the payment of additional
rent to SSC in order for SSC to recover the costs of the initial
acquisition of the leasehold interest. The sublease has an initial term
expiring in fiscal 2000 and provides for rent in the amount of 2% of Total
Sales, with a minimum rent equal to $2.00 per square foot and provides five
additional five-year renewal terms. During fiscal 1996, the Company
recorded expenses in the aggregate to SSC of $210,457 pursuant to this
sublease.

Effective August 1995, SSC acquired one of the Company's unrelated
party store leases. The lease term expires April 30, 2002, has a base rent
of $1.53 per square foot and provides for one additional renewal term of
ten years under the same terms and conditions as the current lease term.
For fiscal 1996, the Company recorded expenses to SSC of $195,162 for this
lease.

<PAGE> 17

Effective January 1, 1996, the Company subleased from SSC a lease
previously assigned to the Company by SSC to enable SSC to recover the
costs of remodeling the demised premises. The Company's sublease expires
December 31, 2007 and provides for percentage rent equal to 2% of Total
Sales in excess of a minimum base rent of $4.50 per square foot with three
additional renewal terms of five years each. For fiscal 1996, the Company
recorded expenses to SSC of $211,570 for this sublease.

The Company has entered into leases for one additional store
location from SSC and one additional store location from an affiliate of
SSC which are to open in fiscal 1997. These leases provide for percentage
rent equal to 2% of Total Sales in excess of a specified sales level or
base rent with base rents ranging from $5.50 to $7.00 per square foot for
the initial term and provide lease renewal terms of three five-year terms
and four five-year terms, respectively. Generally, the renewal terms are at
the same terms and conditions as the original term except rent which may
increase for the renewal terms.

SSC operates a chain of furniture stores, four of which operate in
separate space subleased from the Company at four of its store locations.
Each of these furniture store subleases (the "Furniture Subleases") are for
a term concurrent with the respective lease between the Company and a third
party landlord. Each Furniture Sublease provides for the payment by SSC of
base rent and other charges in amounts at least equal to its pro rata share
based on square footage and its pro rata share of any percentage rent based
on its gross sales. Effective January 1, 1996, one of these Furniture
Subleases was terminated, and as a result the furniture store now subleases
directly from SSC. For fiscal 1996, SSC paid to the Company an aggregate of
$960,517 pursuant to these Furniture Subleases.

LICENSE AGREEMENTS WITH AFFILIATES

The Company operates as licensee the apparel, housewares and
domestic departments in two department stores operated by The Valley Fair
Corporation ("Valley Fair") in New Jersey. SSC controls Valley Fair by
virtue of certain common officers and directors and its ownership of 78.2%
of the outstanding stock of Valley Fair and the ownership by an affiliate
of 14.8% of such stock, the balance of which stock is publicly owned. The
Company pays Valley Fair a license fee of 7.3% of the net sales of the
departments for occupancy and 3.7% of net sales for advertising, against an
annual aggregate minimum of $733,000 for both stores. The Company uses
employees of Valley Fair to operate the departments and reimburses Valley
Fair for all costs associated with such employees. The aggregate license
fees, including advertising, paid by the Company to Valley Fair during
fiscal 1996 were $2,568,181.

Valley Fair's wholly owned subsidiary, L.F. Widmann, Inc.
("Widmann"), has entered into a license agreement to operate the health and
beauty aids departments in the Company's stores. The license agreement, as
amended, expires in June of 1997. Widmann pays annual license fees to the
Company based on 5.0% of net sales. Widmann is required to reimburse the
Company 2% of its sales for advertising and 2.9% of its sales for
administrative expenses. The license fees paid by Widmann to the Company
during fiscal 1996 were $1,941,879.

SSC owns 50% of the stock of Shonac Corporation ("Shonac"), and the
remaining 50% is owned by certain members of the management of Shonac and
their families. The Company has license agreements with Shonac for the
operation of the shoe departments in all of the Company's stores. The
agreements expire in the year 2004. Under the terms of the agreements as
amended, Shonac pays a license fee to the Company in an amount
approximating 11% of its net sales in the Company's stores. Shonac is
required to reimburse the Company 0.9% of its sales for administrative
expenses. Shonac is also required to reimburse the Company 10% of the
Company's aggregate costs for advertising expenses. The aggregate license
fees paid by Shonac to the Company for fiscal 1996 were $13,219,936.

<PAGE> 18

MERCHANDISE TRANSACTIONS WITH AFFILIATES

The Company from time to time purchases merchandise from
affiliates of SSC. Some of such affiliates manufacture, import and
wholesale apparel as their principal business. The members of the Company's
merchandising staff use these sources and make their purchasing decisions
in the same manner as with unaffiliated sources. Any merchandise purchased
from such sources is on terms at least as favorable to the Company as could
be obtained in an arm's-length transaction with an unaffiliated third
party, and in certain instances, the Company is given terms preferential to
those available to unaffiliated customers. Total purchases by the Company
from SSC and affiliates for fiscal 1996 were $6,620,539, representing 1.0%
of the Company's total purchases during the fiscal year.

Certain affiliates of SSC from time to time purchase merchandise
from the Company, in some instances on a regular basis. Such purchases are
generally made from merchandise in the Company's warehouse inventory at
prices equal to the Company's cost plus a handling fee of up to 11.0%.
Steinbach's Inc., an S Corp owned by affiliates of SSC, purchased $304,170
of merchandise from the Company during fiscal 1996. Steinbach's operated 29
department stores on the East Coast until its operations were sold to a
third party in January 1996.

SERVICES AGREEMENTS

The Company shares with SSC and its affiliates certain incidental
support personnel and services for the purpose of achieving economies of
scale and cost savings. These shared services include certain
architectural, legal, advertising, buying and administrative services. The
Company and SSC have entered into a Corporate Services Agreement that sets
forth the terms for payment of the costs of these shared services. The
Company believes that it is able to obtain such services at a cost which is
equal to or below the cost of providing such services by itself or
obtaining such services from unaffiliated third parties. For fiscal 1996,
the Company paid SSC or its affiliates $1,362,026 for such services and the
Company was reimbursed $180,458 by SSC and its affiliates for such
services. The Corporate Services Agreement also provides for participation
by the Company in the self-insurance program maintained by SSC on the same
basis as previous participation by the Division. Under that program, the
Company is self-insured for purposes of personal injury and property
damage, motor vehicle and Ohio workers' compensation claims up to various
specified amounts, and for casualty losses up to $100,000. Claims and
losses in excess of the specified amounts are covered by stop-loss or
excess liability policies maintained by SSC, which include the Company as a
named insured. SSC maintains reserves and pays claims for self-insured
amounts under the program and will continue to do so with respect to the
Company's participation in the program. SSC charges its affiliates,
divisions and the Company premiums based, among other factors, on loss
experience and its actual payroll and related costs for administering the
program. For fiscal 1996, the Company paid SSC $5,629,667 for
participation in the program.

REPORT TO BE PRESENTED AT THE MEETING

There will be presented at the meeting the Company's Annual Report
to Shareholders for the fiscal year ended August 3, 1996, containing
financial statements for such year and the signed opinion of Coopers &
Lybrand L.L.P., independent public accountants, with respect to such
financial statements. It is anticipated that representatives of Coopers &
Lybrand L.L.P., will be present at the Annual Meeting to respond to
appropriate questions and to make a statement if such representatives so
desire. The Annual Report is not to be regarded as proxy soliciting
material and Management does not intend to ask, suggest or solicit any
action from the shareholders with respect to such report.

<PAGE> 19

PROPOSAL TWO: APPROVAL OF INCREASE IN SHARES AVAILABLE FOR ISSUANCE
UNDER THE COMPANY'S 1991 STOCK OPTION PLAN

The Board of Directors has approved amendments to the Company's
1991 Stock Option Plan (the " 1991 Plan"), subject to approval of the
amendments by the shareholders at the Annual Meeting: (a) to increase the
number of Common Shares available for issuance under the 1991 Plan from
1,800,000 shares to 2,500,000 shares; and (b) to provide that Nonqualified
Options (as hereinafter defined) are transferable by the optionholders
either (i) if transferred without consideration to immediate family
members, or entities they control, or (ii) if such transfer is approved by
the Committee (as hereinafter defined). To date, options for 1,656,400
shares have been granted pursuant to the 1991 Plan, net of forfeitures,
leaving options for only 143,600 shares available for issuance.

The purposes of the 1991 Plan are to promote the growth and
profitability of the Company by increasing the opportunity for key
employees to personally participate as equity owners in the financial
success of the Company and to assist the Company in attracting and
retaining highly qualified employees. The Board believes that, in order to
accomplish these purposes, the 1991 Plan should be amended to increase the
number of shares available for issuance. In addition, the SEC recently
amended Rule 16b-3 to remove restrictions on the transferability of stock
options, and the Board has determined to amend the 1991 Plan accordingly.
The affirmative vote of the holders of a majority of the Common Shares of
the Company present and entitled to vote at the meeting is required to
approve the amendments to the 1991 Plan. The persons appointed as proxies
will vote FOR approval, unless otherwise directed. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENTS TO
THE COMPANY'S 1991 STOCK OPTION PLAN.

DESCRIPTION OF THE 1991 PLAN

The 1991 Plan provides for the issuance of options to purchase up
to 1,800,000 Common Shares of the Company, subject to adjustment for stock
splits and other changes in the Company's capitalization. The Common Shares
issued pursuant to the options may be either treasury shares or authorized
and unissued shares. At October 29, 1996, the closing reported sale price
of the Common Shares on the New York Stock Exchange was $12.625 per share.

Options granted under the 1991 Plan either meet the requirements of
Section 422A of the Internal Revenue Code of 1986, as amended ("Incentive
Options") or do not meet such requirements ("Nonqualified Options").
Certain key employees of the Company and SSC and certain other persons who
provide services to the Company or SSC are eligible to receive options
under the 1991 Plan. Members of the Board who are not officers or employees
of the Company are not eligible to receive options under the 1991 Plan. The
approximate number of persons technically eligible to participate in the
1991 Plan is 1,000. Options are granted to persons selected by the Stock
Option Committee of the Company's Board of Directors (the "Committee")
consisting of directors who are not eligible to receive options under the
1991 Plan. The Committee determines the number of shares subject to option,
the exercise price, the exercise period of such option and whether the
option is intended to be a Nonqualified Option or an Incentive Option. The
Committee has the discretion under the 1991 Plan to make cash grants to
optionholders that are intended to offset a portion of the taxes payable
upon exercise of Nonqualified Options or on certain dispositions of shares
acquired under Incentive Options.

The aggregate fair market value of the Common Shares with respect
to which Incentive Options are exercisable for the first time by an
optionholder during any calendar year may not exceed $100,000. The exercise
price of an Incentive Option may not be less than the fair market value of
the Common Shares on the date of grant; the exercise period may not extend
beyond ten years from the date of grant. In the event an Incentive Option
is granted to an individual who is deemed to own more than 10% of the total
combined voting power of all classes of stock of the Company or SSC, then
the option price per share must be equal to or greater than 110% of the
fair market value per share at the time the

<PAGE> 20

option is granted and the exercise period may not extend beyond five years
from the date of grant. None of such restrictions apply to the grant of
Nonqualified Options, which may have an exercise price less than the fair
market value of the underlying Common Shares on the date of grant and may
be exercisable for an indeterminate period of time in each case as
determined by the Committee. All of the options under the 1991 Plan
terminate on or up to one year after termination of the optionholder's
employment with the Company or SSC, as the case may be, and none of the
Incentive Options are transferable by the holder except by will or the laws
of descent and distribution. As amended, Nonqualified Options under the
1991 Plan are transferable by optionholders either (i) if transferred
without consideration to immediate family members, or entities they
control, or (ii) if such transfer is approved by the Committee.

The exercise price for both Nonqualified Options and Incentive
Options must be paid either in cash, with previously acquired Common Shares
of the Company, the optionholder's promissory note or any combination of
the foregoing, provided, however, use of consideration other than cash
requires the consent of the Committee.

The Board may terminate, amend or modify the 1991 Plan at any time,
provided, however, that no such action may adversely affect any option
previously granted, without the consent of the optionholder. In addition,
without shareholder approval, no such action of the Board may (a) increase
the number of shares for which options may be granted, other than as a
result of changes in capitalization, (b) materially modify eligibility
requirements for participation in the 1991 Plan, (c) materially increase
the benefits accruing to optionholders, or (d) make certain specified other
changes to the 1991 Plan affecting the ability to grant Incentive Options
or meet the requirements of SEC Rule 16b-3. The Plan terminates on June 3,
2001. Any stock option outstanding at the termination date of the 1991 Plan
will remain outstanding until it has either been exercised or expires by
its terms.

FEDERAL INCOME TAX CONSEQUENCES

With respect to all Nonqualified Options, in general, for federal
income tax purposes under present law:

(i) The grant of the option, by itself, will not result in income
to the optionholder.

(ii) Except as provided in (v) below, the exercise of the option
(in whole or in part, according to its terms) will result in income to the
optionholder at that time in an amount equal to the excess (if any) of the
fair market value of the stock on the date of exercise over the option
price.

(iii) The tax basis of the stock acquired upon exercise of the
option, which will be used to determine the amount of any gain or loss on a
future taxable disposition of such stock, will be the fair market value of
the shares on the date of exercise.

(iv) No deduction will be allowable to the Company upon the grant
of such an option, but upon exercise of such an option a deduction will be
allowable to the Company at that time in an amount equal to the amount of
income realized by the optionholder exercising the option if the Company
deducts and withholds appropriate federal withholding tax.

<PAGE> 21

the tax basis of such excess shares will be such fair market value, and the
holding period of the optionholder in such shares will begin as of the date
such shares are transferred to the optionholder.

With respect to all Incentive Options, in general, for federal
income tax purposes under present law:

(i) Neither the grant nor the exercise of an option, by itself,
will result in income to the optionholder except that, under Section 56 of
the Internal Revenue Code of 1986, as amended (the "Code"), the excess of
the fair market value of the stock at the time of exercise over the option
price is an adjustment in computing the amount of alternative minimum
taxable income which may, under certain circumstances, result in an
alternative minimum tax liability to the optionholder under Section 55 of
the Code.

(ii) If the shares acquired upon exercise of an option are disposed
of in a taxable transaction after the expiration of two years from the date
the option was granted for such shares and after the expiration of one year
from the date on which such shares are transferred to the optionholder,
long-term capital gain or loss will be realized by the optionholder in an
amount equal to the difference between the option price and the amount
realized by the optionholder.

(iii) If the shares acquired upon exercise of an option are
disposed of within the two year period from the date of grant or within the
one year period after transfer of the shares to the optionholder:

(a) Ordinary income will be realized by the optionholder at the time of
such disposition in the amount of the excess, if any, of the fair market
value of the shares at the time of such exercise over the option price, but
not in an amount exceeding the excess, if any, of the amount realized by
the optionholder over the option price.

(b) Short term or long term capital gain will be realized by the
optionholder at the time of any such taxable disposition in an amount equal
to the excess, if any, of the amount realized over the fair market value of
the shares at the time of such exercise.

(c) Short term or long term capital loss will be realized by the
optionholder at the time of any such taxable disposition in an amount equal
to the excess, if any, of the option price over the amount realized.

(iv) No deduction will be allowed to the Company with respect
to options granted or shares transferred upon exercise thereof, except that
if a disposition is made by the optionholder within the two year period or
the one year period referred to above, the Company will be entitled to a
deduction in the taxable year in which the disposition occurred in an
amount equal to the amount of ordinary income realized by the optionholder
making the disposition.

(v) With respect to the exercise of an option and the payment
of the option price by the delivery of Common Shares, to the extent that
the number of shares received does not exceed the number of shares
surrendered, no taxable income will be realized by the optionholder at that
time, the tax basis of the shares received will be the same as the tax
basis of the shares surrendered and the holding period (except for the one
year period referred to above) of the optionholder in the shares received
will include his holding period in the shares surrendered. To the extent
that the number of shares received exceeds the number of shares
surrendered, no taxable income will be realized by the optionholder at that
time, such excess shares will be considered incentive stock option stock
with a zero basis and the holding period of the optionholder in such shares
will begin on the date such shares are transferred to the optionholder. If
the shares surrendered were acquired as the result of the exercise of an
incentive stock option and the surrender takes place within two years from
the date the option relating to the surrendered shares was granted or
within one year from such exercise, the surrender will result in the
realization of

<PAGE> 22

ordinary income by the optionholder at that time in the amount of the
excess, if any, of the fair market value of the shares surrendered over the
option price of such shares. If any of the shares received are disposed of
within one year after the shares are transferred to the optionholder, the
optionholder will be treated as first disposing of the shares with a zero
basis.

OTHER INFORMATION WITH RESPECT TO OPTIONS

As of the date of this Proxy Statement, the Committee has not
taken any action or developed any plan to award options for the additional
shares to be available under the amendments to the 1991 Plan. From a
historical stand point, the number of shares subject to options granted to
executive officers of the Company named above under "Executive
Compensation" is listed in the "Aggregated Option Exercises and Fiscal
Year-end Option Value Table" set forth above. In addition, pursuant to the
terms of his employment agreement, Donald R. Andrus was granted an option
to purchase 10,000 Common Shares on October 2, 1996 at a price of $8.94 per
share. The number of Common Shares subject to options granted under the
1991 Plan to all executive officers and directors as a group is 520,500 and
the number of Common Shares subject to options granted to all other
recipients is 1,135,900. All options granted under the 1991 Plan have been
granted at exercise prices equal to the fair market value of the Common
Shares on the date of grant and are exercisable 20% per year, beginning on
the first anniversary of the date of grant, on a cumulative basis, and
remain exercisable for until 10 years from the date of grant. Directors who
are not employees of the Company are not eligible to receive options under
the 1991 Plan.

<PAGE> 23

PROPOSAL THREE: APPROVAL OF INCREASE IN SHARES AVAILABLE FOR ISSUANCE
UNDER THE COMPANY'S NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

The Board of Directors has approved amendments to the
Company's Non-employee Director Stock Option Plan (the "Non-employee
Director Plan"), subject to approval of the amendments by the shareholders
at the Annual Meeting: (a) to increase the number of Common Shares
available for issuance under the Non-employee Director Plan from 50,000
shares to 130,000 shares; (b) to provide that one option to purchase 1,000
Common Shares is automatically granted to each non-employee director on the
first NYSE trading day in each calendar quarter; (c) to provide that
options are transferable by the optionholders either (i) if transferred
without consideration to immediate family members, or entities they
control, or (ii) if such transfer is approved by the Board; and (d) to
provide that the plan will terminate on the tenth anniversary of its
initial adoption.

Under the Non-employee Director Plan, as originally adopted,
one option to purchase 2,000 Common Shares was automatically granted to
each non-employee director on the first NYSE trading day in each calendar
year. The Non-employee Director Plan was amended, effective in the fourth
quarter of fiscal 1995, to provide for the automatic grant of one option to
purchase 1,000 Common Shares to each non-employee director on the first
NYSE trading day in each calendar quarter. The exercise price for each
option is the fair market value of the Common Shares on the date of grant.
The exercise price must be paid either in cash, with previously acquired
Common Shares of the Company, the optionholder's promissory note or any
combination of the foregoing, provided, however, use of consideration other
than cash requires the consent of the Board. All of the options under the
Non-employee Director Plan become exercisable one year after the date of
grant, remain exercisable for a period of ten years from the date of grant,
subject to termination on or up to one year after termination of the
optionholder's service as a director of the Company. The options do not
meet the requirements for incentive stock options under Section 422A of the
Internal Revenue Code of 1986, as amended. In general, treatment for
federal income tax purposes under present law of grants and exercises of
options under the Non-employee Director Plan is the same as for grants and
exercises of Nonqualified Options under the Company's 1991 Stock Option
Plan described in Proposal Two above. Prior to the amendments, none of the
options were transferable by the holder except by will or the laws of
descent and distribution.

The Board may terminate, amend or modify the Non-employee
Director Plan at any time, provided, however, that no such action may
adversely affect any option previously granted, without the consent of the
optionholder. In addition, such amendments may be subject to shareholder
approval if required under the Code or in order to meet the requirements of
SEC Rule 16b-3. Prior to the amendments, the Non-employee Director Plan
terminated on its fifth anniversary, and as amended it terminates on its
tenth anniversary, or September 24, 2002. Any stock option outstanding at
the termination date of the Non-employee Director Plan will remain
outstanding until it has either been exercised or expires by its terms.

Issuance of the additional shares authorized by the amendments
is conditioned upon listing the shares with the NYSE and the NYSE requires
that the amendments to the Non-employee Director Plan be approved by the
Company's shareholders before the shares may be listed. Accordingly, the
Board has directed that the amendments to the Non-employee Director Plan be
submitted to the shareholders for approval at the Annual Meeting. The
affirmative vote of the holders of a majority of the Common Shares of the
Company present and entitled to vote at the meeting is required to approve
the amendments to the Non-employee Director Plan. The persons appointed as
proxies will vote FOR approval, unless otherwise directed. THE BOARD OF
DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENTS TO THE NON-EMPLOYEE DIRECTOR PLAN.

<PAGE> 24

COST OF SOLICITATION OF PROXIES

The Company will bear the cost of the solicitation of proxies,
including the charges and expenses of brokerage firms and others for
forwarding solicitation material to beneficial owners of stock.
Representatives of the Company may solicit proxies by mail, telegram,
telephone, or personal interview.

SHAREHOLDER PROPOSALS

Each year the Board of Directors submits its nominations for
election of directors at the Annual Meeting of Shareholders. Other
proposals may be submitted by the Board of Directors or the shareholders
for inclusion in the Proxy Statement for action at the Annual Meeting. Any
proposal submitted by a shareholder for inclusion in the Proxy Statement
for the Annual Meeting of Shareholders to be held in 1997 must be received
by the Company (addressed to the attention of the Secretary) on or before
July 4, 1997. To be submitted at the meeting, any such proposal must be a
proper subject for shareholder action under the laws of the State of Ohio,
and must otherwise conform to applicable requirements of the Proxy Rules of
the Securities and Exchange Commission.

OTHER MATTERS

The only business which the management intends to present at the
meeting consists of the matters set forth in this statement. The management
knows of no other matters to be brought before the meeting by any other
person or group. If any other matter should properly come before the
meeting, the proxy enclosed confers upon the persons designated herein
authority to vote thereon in their discretion.

THE COMPANY'S 1996 ANNUAL REPORT, INCLUDING FINANCIAL STATEMENTS,
WAS FURNISHED TO SHAREHOLDERS PRIOR TO OR CONCURRENTLY WITH THE MAILING OF
THIS PROXY STATEMENT. EXTRA COPIES OF THE ANNUAL REPORT, AND COPIES OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND EXCHANGE
COMMISSION, ARE AVAILABLE UPON REQUEST, DIRECTED TO ROBERT M. WYSINSKI,
SENIOR VICE PRESIDENT, TREASURER AND SECRETARY OF THE COMPANY, AT 3241
WESTERVILLE ROAD, COLUMBUS, OHIO 43224.

<PAGE> 25
VALUE CITY DEPARTMENT STORES, INC.
3241 Westerville Road
Columbus, Ohio 43224

PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
December 3, 1996

The undersigned hereby appoints Herbert E. Minkin and Richard L. Walters, or
either of them, my attorneys and proxies, with full power of substitution, to
vote at the annual meeting of shareholders of Value City Department Stores,
Inc. to be held on December 3, 1996, and at any adjournment thereof, with all
of the powers I would have if personally present, for the following purposes:

1. ELECTION OF DIRECTORS.

[ ] FOR all nominees listed below
(except as marked to the contrary).

[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below.

(INSTRUCTIONS: Do not check "WITHHOLD AUTHORITY" to vote for only certain
individual nominees. To withhold authority to vote for any
individual nominee, strike a line through the nominee's name
below and check "FOR").

Jon P. Diamond Jay L. Schottenstein
Richard Gurian Saul Schottenstein
George A. Iacono Robert L. Shook
Dr. Norman Lamm Robert M. Wysinski
Geraldine H. Schottenstein

2. To approve the amendments to the Company's 1991 Stock Option Plan described
in the accompanying Proxy Statement.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. To approve the amendments to the Company's Non-employee Director Stock
Option Plan described in the accompanying Proxy Statement.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND
ANY ADJOURNMENT THEREOF.

THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS AND, WHEN
EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE
ABOVE PROPOSALS.

The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting
of Shareholders, dated November 4, 1996, the Proxy Statement, and the Annual
Report to Shareholders of the Company for the fiscal year ended August 3, 1996.
Any proxy heretofore given to vote said shares is hereby revoked.

Dated , 1996
-------------------

-----------------------------
Signature

Signature(s) shall agree with the
name(s) printed on this proxy.

If signing as attorney, executor,
administrator, trustee or guardian,
please give your full title as such.

PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.