BRYLANE L P
10-Q, 1996-09-05
CATALOG & MAIL-ORDER HOUSES
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<PAGE>

===============================================================================

                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED AUGUST 3, 1996

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

Commission file number:    33-69532

                                 BRYLANE, L.P.
            (Exact name of registrant as specified in its charter)

        DELAWARE                                             35-1895382
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)

                             BRYLANE CAPITAL CORP.
           (Exact name of co-registrant as specified in its charter)

        DELAWARE                                             95-4439747
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)

                              463 SEVENTH AVENUE
                              NEW YORK, NY  10018
                   (Address of principal executive offices)
              Registrant's telephone number, including area code:
                                (212) 613-9500

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 
                                        ---     ---

The number of shares of the registrant's common stock outstanding: 
Not Applicable.


                             Page 1 of  15  pages

===============================================================================
<PAGE>
 
                                 BRYLANE, L.P.
                             BRYLANE CAPITAL CORP.
                                   Form 10-Q
                        For the Quarterly Period Ended
                                August 3, 1996


<TABLE> 
<CAPTION> 
                                     INDEX                                Page
                                                                          ----
<S>                                                                       <C> 
Part I.   FINANCIAL INFORMATION:

  Item 1.  Financial Statements
     a)  Consolidated Balance Sheets
           February 3, 1996 and August 3, 1996 (unaudited)                 3

     b)  Consolidated Statements of Operations (unaudited)
           Thirteen weeks ended July 29, 1995 and August 3, 1996 and
           twenty-six weeks ended July 29, 1995 and August 3, 1996         4

     c)  Consolidated Statements of Cash Flows (unaudited)
           Twenty-six weeks ended July 29, 1995 and August 3, 1996         5

     d)  Notes to Unaudited Financial Statements                           6

  Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                       8

Part II.  OTHER INFORMATION:

  Item 6.  Exhibits and Reports on Form 8-K                               14

Signature                                                                 15
</TABLE> 

                                    Page 2

<PAGE>
                        PART I - FINANCIAL INFORMATION
                        ------------------------------

ITEM 1. - FINANCIAL STATEMENTS
- ------------------------------

                                 BRYLANE, L.P.
                          CONSOLIDATED BALANCE SHEETS
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                          February 3,   August 3,
                                                                                             1996         1996
                                                                                          -----------  ----------
                                                                                                       (Unaudited)
<S>                                                                                      <C>           <C>
                                  ASSETS
                                  ------
Current assets:
    Cash and cash equivalents..........................................................  $   7,469      $  19,881
    Accounts receivable................................................................      2,387          2,902
    Inventories........................................................................     76,627         84,484
    Paper inventory....................................................................     16,102         12,810
    Other..............................................................................      4,559          2,878
                                                                                         ---------      ---------

            Total current assets                                                           107,144        122,955

Property and equipment, net............................................................     28,223         28,098

Catalog costs..........................................................................     18,131         15,629

Organization and deferred financing costs..............................................      8,228          7,464

Intangibles and other assets...........................................................    166,177        163,430
                                                                                         ---------      ---------

            Total assets                                                                 $ 327,903      $ 337,576
                                                                                         =========      =========


                          LIABILITIES AND EQUITY
                          ----------------------
Current liabilities:
    Accounts payable...................................................................  $  47,131      $  51,235
    Accrued interest...................................................................      6,366          5,633
    Accrued expenses...................................................................     12,231         11,200
    Reserve for returns................................................................      4,192          3,812
    Current portion of long-term debt..................................................     13,720         14,170
                                                                                         ---------      ---------

            Total current liabilities                                                       83,640         86,050

Long-term debt.........................................................................    213,020        205,871
Other long-term liabilities............................................................      4,056          4,885
                                                                                         ---------      ---------

            Total liabilities                                                              300,716        296,806

Partnership equity:
     General partner, 2,562,500 units..................................................     25,625         25,625
     Limited partners, 10,340,000 units at February 3, 1996 and 10,342,500 units
         at August 3, 1996.............................................................    105,204        105,257
     Reduction for predecessor cost - carryover basis..................................   (152,067)      (152,067)
     Loans to management investors.....................................................     (2,515)        (2,490)
     Retained earnings.................................................................     50,940         64,445
                                                                                         ---------      ---------
            Total partnership equity...................................................     27,187         40,770
                                                                                         ---------      ---------

            Total liabilities and equity                                                 $ 327,903      $ 337,576
                                                                                         =========      =========
</TABLE>

           See Accompanying Notes to Unaudited Financial Statements.

                                    Page 3
<PAGE>
 
                                 BRYLANE, L.P.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                            (DOLLARS IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                             Thirteen Weeks Ended                     Twenty-six Weeks Ended
                                                             --------------------                     ----------------------

                                                           July 29,         August 3,               July 29,           August 3,
                                                             1995             1996                    1995               1996 
                                                           --------         ---------               --------           ---------
<S>                                                      <C>               <C>                     <C>               <C>           
Net sales..............................................   $150,784          $157,945                $293,979           $308,625    
                                                                                                                                   
  Cost of goods sold...................................     75,471            77,236                 147,099            149,898    
                                                          --------          --------                --------           --------    
                                                                                                                                   
Gross margin...........................................     75,313            80,709                 146,880            158,727    
                                                                                                                                   
Operating expenses:                                                                                                                
  Catalog and advertising..............................     39,651            41,470                  82,624             88,988    
  Fulfillment..........................................      8,709            10,106                  17,491             18,380    
  Support services.....................................      9,062            11,157                  17,688             21,701    
  Intangibles and organization cost amortization.......      1,061             1,409                   2,121              2,818    
                                                          --------          --------                --------           --------    
Total operating expenses...............................     58,483            64,142                 119,924            131,887    
                                                          --------          --------                --------           --------    
                                                                                                                                   
Operating income.......................................     16,830            16,567                  26,956             26,840    
                                                                                                                                   
Interest expense, net..................................      4,712             5,235                   9,762             10,791    
                                                          --------          --------                --------           --------    
                                                                                                                                   
Income before income taxes.............................     12,118            11,332                  17,194             16,049    
                                                                                                                                   
Provision for income taxes.............................         41                28                      81                 57    
                                                          --------          --------                --------           --------    
                                                                                                                                   
Net income.............................................   $ 12,077          $ 11,304                $ 17,113           $ 15,992    
                                                          ========          ========                ========           ========     
</TABLE>

           See Accompanying Notes to Unaudited Financial Statements.

                                    Page 4

 
<PAGE>
 
                                 BRYLANE, L.P.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (DOLLARS IN THOUSANDS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                         Twenty-six Weeks Ended
                                                         ----------------------

                                                         July 29,      August 3,
                                                          1995           1996
                                                         --------      ---------
<S>                                                      <C>           <C>
OPERATING ACTIVITIES:
  Net income..........................................  $ 17,113      $ 15,992
  Impact of other operating activities on
   cash flows:
    Depreciation......................................     1,656         2,148
    Amortization:
      Intangibles and organization costs..............     2,121         2,818
      Deferred financing costs (included in
       interest expense)...............................      734           734
      Discount on notes (included in interest
       expense)........................................       48            48
    Loss on disposal of assets........................         -             5
    Changes in assets and liabilities:
      Inventories.....................................     6,887        (7,858)
      Catalog costs and paper inventory...............    (1,854)        5,795
      Accounts payable and accrued expenses...........      (983)        4,703
      Accrued interest................................        38          (733)
      Other assets and liabilities....................     1,089         1,574
                                                        --------      --------

Net cash provided by operating activities.............    26,849        25,226
                                                        --------      --------

INVESTING ACTIVITIES:
  Capital expenditures................................    (4,841)       (2,056)
                                                        --------      --------

Net cash used in investing activities.................    (4,841)       (2,056)
                                                        --------      --------

FINANCING ACTIVITIES:
  Payments on bank credit facility....................   (15,777)       (6,748)
  Tax distributions to partners.......................    (4,967)       (4,087)
  Deferred offering costs.............................      (175)            -
  Proceeds from the sale, net of repurchase,
      of partnership interests, net of
      management notes................................         -            77
                                                        --------      --------

Net cash used in financing activities.................   (20,919)      (10,758)
                                                        --------      --------

Cash and cash equivalents, at beginning of period.....    28,495         7,469
                                                        --------      --------

Cash and cash equivalents, at end of period...........  $ 29,584      $ 19,881
                                                        ========      ========

Supplemental disclosure of cash flow information:

  Interest paid.......................................  $  9,624      $ 11,049
                                                        ========      ========
</TABLE>

  Income taxes paid during each of the periods presented were not material.

           See Accompanying Notes to Unaudited Financial Statements.

                                    Page 5
<PAGE>
 
                                 BRYLANE, L.P.
                    NOTES TO UNAUDITED FINANCIAL STATEMENTS

(1) NATURE OF OPERATIONS:

          Brylane is a catalog retailer of special size women's apparel, regular
size (missy) women's apparel, and special size men's apparel. The women's
catalogs market apparel in the budget to low-moderate price range, and the men's
catalogs market apparel in the moderate price range. Brylane services the
special size customer through its Lane Bryant, Roaman's and KingSize (men's)
catalogs, the missy customer through its Lerner catalog, and the mature missy
customer through its Sue Brett catalog. Brylane also markets apparel to these
same customer segments through four catalogs under licensing arrangements with
Sears Shop at Home Services, Inc. ("Sears").

          Brylane's merchandising strategy is to provide affordable, private
label apparel with a consistent quality and fit, to concentrate on apparel with
limited fashion risk, and to offer a broader selection of sizes and styles in
special size apparel than can be found at most retail stores and in other
competing catalogs. Each of Brylane's catalogs offers its value-conscious
customers contemporary, traditional and basic apparel.

(2) ORGANIZATION AND BASIS OF FINANCIAL STATEMENT PRESENTATION:

          In August, 1993, certain affiliates of Freeman Spogli & Co. ("FS&Co.")
and of The Limited, Inc. ("The Limited") formed Brylane, L.P. ("Brylane" or the
"Company"), a Delaware limited partnership, and acquired the Lane Bryant,
Roaman's and Lerner catalog businesses (the "Brylane Acquisition") formerly
conducted by certain direct and indirect subsidiaries of The Limited (the
"Predecessor"). The aggregate purchase price was $335 million. The Brylane
Acquisition closed on August 30, 1993. For accounting purposes, the transaction
was accounted for on the effective date of August 1, 1993.

          In connection with the Brylane Acquisition, certain affiliates of
FS&Co. and certain management investors contributed $75 million to the capital
of Brylane for a 60% (currently 58.6%) aggregate interest. Certain affiliates of
The Limited contributed substantially all assets and liabilities of the catalog
business to Brylane and received cash of $285 million and a 40% (currently
38.7%) aggregate interest in Brylane with an assigned value at $50 million. The
Limited also received a warrant (Limited Warrant) entitling it to purchase up to
1,250,000 newly issued partnership units in Brylane, at a price of $10 per unit.
At July 27, 1996, the Limited Warrant expired as certain conditions were not
met.

          The consolidated financial statements include the accounts of Brylane
and its wholly-owned subsidiaries and partnerships, including Brylane Capital
Corp., B.L. Management Services, Inc., B.L. Catalog Distribution, Inc., B.L.
Management Services Partnership, B.L. Catalog Distribution Partnership, B.N.Y.
Service Corp., KingSize Catalog Sales, L.P., KingSize Catalog Sales, Inc., and
K.S. Management Services, Inc. These entities are collectively referred to as
Brylane or the Partnership. Accounts between the consolidated entities have been
eliminated. Each of the wholly-owned susidiaries and partnerships has guaranteed
Brylane's 10% Senior Subordinated Notes due 2003 (the "Notes"). Separate
financial statements of these subsidiary guarantors have not been included as
the subsidiaries guarantee the Notes on a full, unconditional, and joint and
several basis. Management believes that the aggregate assets, liabilities,
earnings, and equity of the subsidiary guarantors are currently, both on an
individual and a combined basis, inconsequential to Brylane on a consolidated
basis.

(3) ACQUISITION:

          In October, 1995, KingSize Catalog Sales, L.P., an Indiana limited
partnership ("KingSize Partnership") and an indirect wholly-owned entity of
Brylane, L.P., a Delaware limited partnership ("Brylane"), completed the
acquisition of the assets of the KingSize division (the "KingSize Acquisition")
of WearGuard Corporation, a wholly-owned subsidiary of Aramark Corporation
("WearGuard"). The KingSize Acquisition closed on October 16, 1995. For
accounting purposes, the transaction was

                                    Page 6
<PAGE>
 
                                 BRYLANE, L.P.
                    NOTES TO UNAUDITED FINANCIAL STATEMENTS

accounted for on the effective date of October 1, 1995.  The business acquired 
is a catalog business devoted to big and tall men's apparel, footwear and 
related accessories.  The KingSize Acquisition included the sale by WearGuard 
to KingSize Partnership of the inventory, contracts, customer lists, goodwill, 
accounts receivable and certain equipment including personal computers relating 
to the operation of the business, and the assumption of certain liabilities 
relating to the business by the KingSize Partnership.  In addition, the parties 
entered into a Noncompetition Agreement dated October 16, 1995.

     In connection with the KingSize Acquisition, Brylane paid to WearGuard 
$52.5 million in cash and issued to WearGuard 350,000 newly issued limited 
partnership units (currently 2.7%) in Brylane (the "Purchase Price").  Brylane 
financed the cash portion of the Purchase Price out of available funds as well 
as additional borrowings under its Credit Agreement.  In connection with the 
KingSize Acquisition, Brylane further amended its Credit Agreement to provide an
additional $35.0 million in available borrowing capacity.

     Effective July 6, 1996, for business reasons, KingSize Catalog Sales, L.P.,
and KingSize Catalog Sales, Inc. were merged into Brylane.  All of the assets 
and liabilities of these entities were transferred to Brylane which continues to
run the KingSize Big & Tall catalog business.

(4)  RECLASSIFICATIONS:

     Certain items have been reclassified in the accompanying consolidated 
financial statements for prior periods in order to conform with the financial 
statement presentation adopted for the fiscal year ending February 3, 1996.  
Such reclassifications had no effect on previously reported net income.

(5)  UNAUDITED INTERIM FINANCIAL STATEMENTS:

     The financial statements as of and for the thirteen weeks ended July 29, 
1995 and August 3, 1996 and the twenty-six weeks ended July 29, 1995 and August 
3, 1996 are unaudited and are presented pursuant to the rules and regulations of
the Securities and Exchange Commission.  Accordingly, the financial statements 
should be read in conjunction with the financial statement disclosures contained
in Brylane's Form 10-K for the fiscal year ended February 3, 1996.  In the 
opinion of management, the accompanying financial statements reflect all 
adjustments necessary (which are of a normal recurring nature, unless separately
disclosed) to present fairly the financial position and results of operations 
and cash flows for the interim periods presented, but are not necessarily 
indicative of the results of operations and cash flows for a full fiscal year.

                                    Page 7
<PAGE>
 
                                 BRYLANE, L.P.

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------

     The following discussion should be read in conjunction with the financial 
statements and related notes thereto which appear elsewhere in this Form 10-Q 
and in conjunction with the Annual Report on Form 10-K as filed with the 
Securities and Exchange Commission on May 3, 1996 (File No. 33-69532).

     As a result of the Brylane Acquisition and the KingSize Acquisition and the
application of purchase accounting related thereto, the results of operations
for the twenty-six weeks ended August 3, 1996 reflect amortization of intangible
assets related to the Brylane Acquisition of $2.1 million and related to the
KingSize Acquisition of $700,000. Transition costs to move inventory acquired as
a result of the KingSize Acquisition from its pre-acquisition location in
Norwell, Massachusetts to the Company's Indianapolis, Indiana fulfillment center
also negatively impacted the Company's gross margin in the first quarter by
$170,000. There will be no further impact on the Company's gross margin due to
these transition costs. However, the Company's results will reflect the
amortization of intangible assets related to the Brylane Acquisition of
approximately $4.2 million per year, additional depreciation associated with the
write-up of certain fixed assets in connection with the Brylane Acquisition of
$368,000 per year, and the amortization of intangible assets related to the
KingSize Acquisition of approximately $1.4 million per year.

                                    Page 8
<PAGE>
 
RESULTS OF OPERATIONS

     The following tables set forth certain operating data of Brylane for the 
periods indicated.
<TABLE>
<CAPTION>
                                                               Thirteen Weeks Ended                 Twenty-Six Weeks Ended
                                                               --------------------                 ----------------------
                                                          July 29, 1995    August 3, 1996       July 29, 1995    August 3, 1996
                                                          -------------    --------------       -------------    --------------
                                                                  (in thousands)                         (in thousands)
    <S>                                                     <C>              <C>                  <C>              <C>
    Net sales.............................................  $150,784         $157,945             $293,979         $308,625
    Gross profit..........................................    75,313           80,709              146,880          158,727

    Operating expenses:
      Catalog and advertising.............................    39,651           41,470               82,624           88,988
      Fulfillment.........................................     8,709           10,106               17,491           18,380
      Support services....................................     9,062           11,157               17,688           21,701
      Amortization of acquisition
        intangibles and organization costs (a)............     1,061            1,409                2,121            2,818
                                                            --------         --------             --------         --------
    Operating income......................................    16,830           16,567               26,956           26,840

      Add back: Amortization of acquisition
        intangibles and organization costs(a).............     1,061            1,409                2,121            2,818
      Add back: Step-up depreciation(b)...................        92               92                  184              184
                                                            --------         --------             --------         --------
    Operating income before acquisition
     related adjustments..................................  $ 17,983         $ 18,068             $ 29,261         $ 29,842
                                                            ========         ========             ========         ========
</TABLE>

     The following table sets forth certain operating data of Brylane expressed 
as a percentage of net sales for the periods indicated.

<TABLE>
<CAPTION>
                                                               Thirteen Weeks Ended                 Twenty-Six Weeks Ended
                                                               --------------------                 ----------------------
                                                          July 29, 1995    August 3, 1996       July 29, 1995    August 3, 1996
                                                          -------------    --------------       -------------    --------------
    <S>                                                       <C>               <C>                 <C>              <C>
    Net sales.............................................    100.0%            100.0%              100.0%           100.0%
    Gross profit..........................................     49.9              51.1                50.0             51.4
    Operating expenses:                                      
      Catalog and advertising.............................     26.3              26.3                28.1             28.8
      Fulfillment.........................................      5.8               6.4                 6.0              6.0
      Support services....................................      6.0               7.1                 6.0              7.0
      Amortization of acquisition                            
       intangibles and organization costs (a).............      0.7               0.9                 0.7              0.9
                                                              -----             -----               -----            -----
    Operating income......................................     11.1              10.4                 9.2              8.7
      Add back: Amortization of acquisition                  
        intangibles and organization costs(a).............      0.7               0.9                 0.7              0.9
      Add back: Step-up depreciation(b)...................      0.1               0.1                 0.1              0.1
                                                              -----             -----               -----            -----
    Operating income before acquisition                      
     related adjustments..................................     11.9%             11.4%               10.0%             9.7%
                                                              =====             =====               =====            =====
</TABLE>
- -------------------
(a)  Represents amortization of goodwill and other intangible assets related to 
the Brylane Acquisition of $125,450 over a 30-year composite life and 
amortization of organizational costs of $300 over five years, and, subsequent to
October 1, 1995, includes amortization related to the KingSize Acquisition of 
goodwill of $50,762 over a 40-year life, customer file of $520 over an eight 
year life, and a noncompetition agreement of $300 over a five year life.
(b)  Property and equipment were written up by $2,943 at the time of the Brylane
Acquisition.  This step-up is being depreciated over eight years using the 
straight-line method.

                                    Page 9
<PAGE>
 
THIRTEEN WEEKS ENDED AUGUST 3, 1996 COMPARED TO THIRTEEN WEEKS ENDED JULY 29, 
1995

     NET SALES.  Net sales for the thirteen weeks ended August 3, 1996 increased
4.7% to $157.9 million from $150.8 million in the comparable period of fiscal 
1995.  The increase in net sales came from the recently acquired KingSize Big & 
Tall catalogs.  Excluding sales from the KingSize Big & Tall catalogs, net sales
declined by 1.1% from $150.8 million in fiscal 1995 to $149.1 million in fiscal 
1996 primarily due to a 2.3% reduction in circulation partially offset by a 
small increase in book productivity.

     GROSS PROFIT.  Gross profit for the thirteen weeks ended August 3, 1996 
improved to $80.7 million (51.1% of net sales) from $75.3 million (49.9% of net 
sales) for the same period of fiscal 1995.  The increase in gross profit as a 
percent of net sales is primarily due to higher initial mark-ups.

     CATALOG AND ADVERTISING EXPENSE.  Catalog and advertising expense is 
comprised of the costs to produce and distribute catalogs, primarily paper, 
printing and catalog mailing costs, and the cost of acquiring new prospect 
names.  For the thirteen weeks ended August 3, 1996, catalog and advertising 
expense increased to $41.5 million (26.3% of net sales) from $39.7 million 
(26.3% of net sales) for the same period of fiscal 1995.  The increase in 
catalog and advertising expense in the thirteen weeks ended August 3, 1996 is 
due to the added circulation for the KingSize Big & Tall business.  Excluding 
the KingSize Big & Tall business, catalog and advertising expense decreased to 
$39.0 million (26.2% of net sales) from $39.7 million (26.3% of net sales) for 
the same period of fiscal 1995 due primarily to lower circulation.

     FULFILLMENT EXPENSE.  Fulfillment expense includes distribution center, 
telemarketing, credit services and customer service expenses, partially offset 
by net merchandise postage revenue.  Fulfillment expense in the thirteen weeks 
ended August 3, 1996 increased to $10.1 million (6.4% of net sales) from $8.7 
million (5.8% of net sales) for the same period in fiscal 1995.  As a percent of
net sales, fulfillment expense was higher due to a decrease in net merchandise 
postage revenue that resulted from increased promotional offerings in the form 
of free shipping and handling and free express shipping, and to a lesser extent,
from increased other operating costs related to the distribution center and the 
San Antonio, Texas telemarketing center.

     SUPPORT SERVICES EXPENSE.  Support services expense includes staffing and 
other administrative overhead costs associated with merchandising, advertising, 
quality assurance, management information systems, finance, human resources, the
New York and Boston offices and the license fees associated with the Company's 
agreements with Sears Shop At Home.  Support services expense for the thirteen 
weeks ended August 3, 1996 increased to $11.2 million (7.1% of net sales) from 
$9.1 million (6.0% of net sales) for the same period in fiscal 1995.  The 
increase in support services expense as a percent of net sales is primarily due 
to the increase in license fees paid to Sears, and to a lesser extent, increased
expenses in certain support areas, partially offset by an increase in licensing 
revenue received from third parties.

     AMORTIZATION EXPENSE.  Acquisition related intangibles and organization 
cost amortization expense in the thirteen weeks ended August 3, 1996 included 
$1.1 million related to the Brylane Acquisition and $0.3 million related to the 
KingSize Acquisition.  Acquisition related intangibles and organization cost 
amortization expense in the thirteen weeks ended July 29, 1995 included $1.1 
million related to the Brylane Acquisition.  The intangible assets related to 
the amortization for the Brylane Acquisition include goodwill, organization 
costs, and other intangible assets and for the KingSize Acquisition include 
goodwill, a noncompetition agreement, customer file and other intangible assets.

     OPERATING INCOME.  Operating income before acquisition related amortization
in the thirteen weeks ended August 3, 1996 increased 0.5% to $18.1 million 
(11.4% of net sales) from $18.0 million (11.9% of net sales) for the same period
of fiscal 1995, primarily as a result of the increase in gross profit as 
described above, partially offset by the increase in catalog and advertising 
expenses, fulfillment expenses, and support service expenses, also described 
above.

     INTEREST EXPENSE.  Interest expense, net, in the thirteen weeks ended 
August 3, 1996 increased to $5.2 million from $4.7 million for the same period 
of fiscal 1995 due to the increased borrowings of $35.0

                                    Page 10
<PAGE>
 
million incurred in connection with the KingSize Acquisition partially offset by
slightly lower interest rates on the Term Loan (as defined below).

TWENTY-SIX WEEKS ENDED AUGUST 3, 1996 COMPARED TO TWENTY-SIX WEEKS ENDED JULY 
29, 1995

     NET SALES. Net sales for the twenty-six weeks ended August 3, 1996
increased 5.0% to $308.6 million from $294.0 million in the comparable period of
fiscal 1995. The increase in net sales came from the recently acquired KingSize
Big & Tall catalogs. Excluding sales from KingSize Big & Tall catalogs, net
sales declined by 1.1% from $294.0 million in fiscal 1995 to $290.7 million in
fiscal 1996 due to a slightly lower book productivity.

     GROSS PROFIT. Gross profit for the twenty-six weeks ended August 3, 1996 
improved to $158.7 million (51.4% of net sales) from $146.9 million (50.0% of 
net sales) for the same period of fiscal 1995.  The increase in gross profit as 
a percent of net sales is primarily due to higher initial mark-ups.

     CATALOG AND ADVERTISING EXPENSE. Catalog and advertising expense for the
twenty-six weeks ended August 3, 1996 increased to $89.0 million (28.8% of net
sales) from $82.6 million (28.1% of net sales) for the same period of fiscal
1995. The increase in catalog and advertising expense in the twenty-six weeks
ended August 3, 1996 is primarily due to increased circulation and higher paper
costs. For the twenty-six weeks ended August 3, 1996, the cost of paper consumed
was higher than the cost of paper consumed for the same period of fiscal 1995.
The Company believes that if paper prices remain at the levels currently being
experienced then paper prices in the second half of fiscal 1996 would be below
the paper prices for the comparable period of fiscal 1995.

     FULFILLMENT EXPENSE. Fulfillment expense in the twenty-six weeks ended
August 3, 1996 increased to $18.4 million (6.0% of net sales) from $17.5 million
(6.0% of net sales) for the same period in fiscal 1995 primarily due to 
increased operating costs related to the distribution center offset by an 
increase in merchandise net postage revenue received from customers.

     SUPPORT SERVICES EXPENSE. Support services expense for the twenty-six weeks
ended August 3, 1996 increased to $21.7 million (7.0% of net sales) from $17.7
million (6.0% of net sales) for the same period in fiscal 1995. The increase in
support services expense is primarily due to the increase in license fees paid
to Sears, and to a lesser extent, increased expenses in certain support areas,
partially offset by an increase in licensing revenue received from third
parties.

     AMORTIZATION EXPENSE.  Acquisition related intangibles and organization 
cost amortization expense in the twenty-six weeks ended August 3, 1996 included 
$2.1 million related to the Brylane Acquisition and $0.7 million related to the 
KingSize Acquisition.  Acquisition related intangibles and organization cost 
amortization expense in the twenty-six weeks ended July 29, 1995 included $2.1 
million related to the Brylane Acquisition.

     OPERATING INCOME. Operating income before acquisition related amortization
in the twenty-six weeks ended August 3, 1996 increased to $29.8 million (9.7% of
net sales) from $29.3 million (10.0% of net sales) for the same period of fiscal
1995, primarily as a result of the increase in gross profit partially offset by
the increase in catalog and advertising expense, fulfillment expenses, and
support services expense as discussed above.

     INTEREST EXPENSE.  Interest expense, net, in the twenty-six weeks ended 
August 3, 1996 increased to $10.8 million from $9.8 million for the same period 
of fiscal 1995 due to the increased borrowings of $35.0 million incurred in 
connection with the KingSize Acquisition partially offset by slightly lower 
interest rates on the Term Loan (as defined below).

LIQUIDITY AND CAPITAL RESOURCES

     The Company has historically met its working capital needs, principally 
building inventory to meet increased sales, and its capital expenditure 
requirements primarily through funds generated from operations.  After the 
Brylane Acquisition and the KingSize Acquisition, the Company's liquidity

                                    Page 11
<PAGE>
 
requirements have also included service on the debt incurred at the time of 
these acquisitions and, to a lesser extent, tax distributions to its partners.

     Cash flow provided by operating activities decreased to $25.2 million for
the twenty-six weeks ended August 3, 1996, from $26.8 million for the twenty-six
weeks ended July 29, 1995. This decrease was primarily due to increased
merchandise inventory owned by the Company at August 3, 1996, partially offset
by a reduction in paper inventory and prepaid catalog costs. The Company's cash
balance was $19.9 million at August 3, 1996, compared to $7.5 million at
February 3, 1996. The increase in the cash balance from February 3, 1996 to
August 3, 1996 was achieved while using $10.8 million for financing activities,
which included $6.7 million in debt payments and $4.1 million in tax
distributions to partners, as well as $2.1 million in capital expenditures as
discussed below. Although the Company's available cash exceeds its current
operating requirements, the Company's ability to prepay debt has been limited by
the terms of the Partnership Agreement entered into at the time of the Brylane
Acquisition.

     Capital expenditures were $2.1 million in the twenty-six weeks ended August
3, 1996 compared to $4.8 million in the same period in fiscal 1995.  The 
Company's capital expenditures for fiscal 1996 are estimated to be $3.7 million.
A significant portion of this amount will be expended toward a $2.9 million 
project which began in April 1996 to replace the original tilt tray sorter 
located at the Company's Indianapolis, Indiana fulfillment center.  This project
is scheduled for completion in the third quarter of 1996, and had expenditures 
of $1.5 million during the first half of fiscal 1996.  Of the remaining capital 
expenditures in the first half of 1996, $300,000 was for the addition of 
conveyors and $300,000 was on miscellaneous improvements.  Brylane plans to fund
its capital expenditures for fiscal 1996 through funds generated from 
operations.

     In connection with the Brylane Acquisition, the Company entered into that 
certain credit agreement dated August 30, 1993 among Brylane and its 
Subsidiaries, Morgan Guaranty Trust Company of New York, as agent, and the other
lenders parties thereto (as amended, the "Credit Agreement"), which then 
consisted of (i) a $110 million six-year amortizing term loan (the "Term Loan") 
and (ii) a $40 million five-year revolving credit facility (the "Revolving 
Credit Facility") (with a $20 million sublimit for letters of credit).  The Term
Loan was used to fund a portion of the required distribution to The Limited upon
the closing of the Brylane Acquisition, and requires scheduled quarterly 
prepayments over its term.  In addition to scheduled principal prepayments on 
the Term Loan, Brylane is obligated to make certain mandatory prepayments of the
Term Loan and the Revolving Credit Facility under certain circumstances.  The 
Revolving Credit Facility may be used for letters of credit and, if necessary, 
general corporate purposes, including working capital needs.  In order to fund a
portion of the purchase price for the KingSize Acquisition, Brylane amended its 
Credit Agreement to provide for an additional $35.0 million term loan.  
Additionally, the letter of credit sublimit of $20.0 million was increased to 
$30.0 million.  The new term loan bears interest at the same rate as the 
existing Term Loan and begins amortizing in October 1999.  A scheduled principal
payment of the Term Loan in the amount of $3.4 million was made in the second 
quarter of fiscal 1996.  Additional scheduled principal payments will equal $7.0
million during the remainder of 1996.  As of August 3, 1996, Brylane had no 
borrowings under the Revolving Credit Facility and, after giving effect to the 
issuance of letters of credit for $20.8 million which the Company intends to pay
through funds generated from operations, had additional capacity under the 
Revolving Credit Facility of approximately $19.2 million.

     Also in connection with the Brylane Acquisition, the Partnership issued 
$125.0 million aggregate principal amount of its senior subordinated notes (the 
"Senior Subordinated Notes").  The Senior Subordinated Notes bear interest at 
10% per annum, payable semi-annually, and mature in 2003.  The Credit Agreement,
as amended, and the Indenture dated as of August 30, 1993 among Brylane and 
Brylane Capital Corp., as Issuers, the Subsidiaries of Brylane, as Guarantors, 
and United States Trust Company of New York, as Trustee (as supplemented, the 
"Indenture") pursuant to which the Senior Subordinated Notes were issued contain
covenants (the "Covenants") that, among other things, restrict the Company's 
ability to incur debt, make distributions, incur liens, make capital 
expenditures and make investments or acquisitions.  During fiscal 1996, Brylane 
has made tax distributions to its partners totaling $4.1 million.  The Company 
expects that it will make total tax distributions to its partners during fiscal 
1996 that will approximate the tax payments the Company would be required to 
make if it were a tax paying corporation, rather than a partnership.  Brylane's 
estimated tax distributions and capital expenditures for fiscal 1996 are in 
compliance with the Covenants.

                                    Page 12
<PAGE>
 
     While no assurances can be given in this regard, based on current and 
projected operating results, Brylane believes that cash flow from operations 
will provide adequate funds for ongoing operations, debt service on its 
indebtedness (including scheduled prepayments under the Credit Agreement), tax 
distributions to its partners and planned capital expenditures through the 
remaining term of the Credit Agreement.  In addition, the Company will have 
availability under the Revolving Credit Facility.

                                    Page 13
<PAGE>
                         PART II  -  OTHER INFORMATION
                         -----------------------------


ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------

     (a)  Exhibits.

          27.1 Financial Data Schedule


     (b)  Reports on Form 8-K.

          There were no reports on Form 8-K filed during the quarter ended 
          August 3, 1996.


                                    Page 14

<PAGE>
 
                                   SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the 
Registrants have duly caused this report to be signed on their behalf by the 
undersigned thereunto duly authorized.



Dated:  September 3, 1996              BRYLANE, L.P.
                                       BRYLANE CAPITAL CORP.



                                       By:  \s\ Robert A. Pulciani
                                            -----------------------------------
                                            Robert A. Pulciani
                                       Authorized Representative of Brylane,
                                       L.P. and Executive Vice President, Chief
                                       Financial Officer and Secretary and
                                       Treasurer of Brylane, L.P. and Brylane
                                       Capital Corp.

                                       (On behalf of the Registrants and as the
                                       principal financial and accounting
                                       officer of each of the Registrants)

                                    Page 15

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 5
<CIK> 0000912276
<NAME> BRYLANE CAPITAL CORP.
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          FEB-01-1997
<PERIOD-START>                             MAY-05-1996
<PERIOD-END>                               AUG-03-1996
<CASH>                                          19,881
<SECURITIES>                                         0
<RECEIVABLES>                                    2,902
<ALLOWANCES>                                         0
<INVENTORY>                                     84,484
<CURRENT-ASSETS>                               122,955
<PP&E>                                          38,491
<DEPRECIATION>                                  10,393
<TOTAL-ASSETS>                                 337,576
<CURRENT-LIABILITIES>                           86,050
<BONDS>                                        205,871
                                0
                                          0
<COMMON>                                             0
<OTHER-SE>                                      40,770
<TOTAL-LIABILITY-AND-EQUITY>                   337,576
<SALES>                                        157,945
<TOTAL-REVENUES>                               157,945
<CGS>                                           77,236
<TOTAL-COSTS>                                   77,236
<OTHER-EXPENSES>                                62,733
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               5,235
<INCOME-PRETAX>                                 11,332
<INCOME-TAX>                                        28
<INCOME-CONTINUING>                             11,304
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    11,304
<EPS-PRIMARY>                                        0
<EPS-DILUTED>                                        0
        

</TABLE>


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