RATIONALE: Estrogen can stimulate the growth of breast cancer cells. Hormone therapy using tamoxifen may fight breast cancer by blocking the uptake of estrogen. Combining chemotherapy with hormone therapy may kill more tumor cells. Chemoprevention therapy is the use of certain drugs to try to prevent the development or recurrence of cancer. The use of fenretinide may be an effective way to prevent the recurrence of breast cancer. It is not yet known whether tamoxifen plus fenretinide is more effective than tamoxifen alone for breast cancer.

PURPOSE: Randomized phase III trial to compare the effectiveness of tamoxifen plus fenretinide with tamoxifen alone in treating postmenopausal women who have stage II or stage III breast cancer that is estrogen receptor positive and/or progesterone receptor positive.

OBJECTIVES: I. Compare disease free survival and overall survival of postmenopausal women with stage II or IIIA breast cancer treated with tamoxifen (TMX) and fenretinide (HPR) vs TMX and placebo. II. Gain wider experience in the use and toxicity of combined TMX/HPR in these patients. III. Obtain tumor tissue samples, as feasible, from these patients for future biologic studies.

OUTLINE: This is a randomized, double blind, placebo controlled, multicenter study. Patients are stratified by participating institution, age (under 70 vs 70 and over), node dissection (yes vs no), number of involved nodes (0 vs 1-3 vs 4 or more), and number of removed nodes (1-5 vs 6 or more). All patients receive oral tamoxifen daily for at least 5 years, beginning immediately after randomization. Patients also receive either oral fenretinide or oral placebo daily for 5 years, beginning within 2 weeks after completion of any radiotherapy, or within 2 weeks of randomization, if no radiation. Patients are followed during and after treatment every 4 months for 2 years, every 6 months for 3 years, then annually thereafter.

PROJECTED ACCRUAL: A total of 1,500 patients will be accrued for this study over approximately 3 years.

DISEASE CHARACTERISTICS: Histologically confirmed adenocarcinoma of the breast Pathologic stage T1-3, N1-2, M0 No clinical or pathologic T4 disease No primary tumor fixed to chest wall No axillary nodes fixed to chest wall or neurovascular bundle No preoperative arm edema No clinical skin involvement (microscopic focal dermal invasion or dermal lymphatic involvement eligible) No clinical N2 disease Modified radical mastectomy or lumpectomy required prior to entry Sentinel node biopsy allowed Randomization required within 12 weeks from definitive surgery Surgery dated from mastectomy or axillary dissection for lumpectomy No positive deep mastectomy margins Radiotherapy planned within 12 weeks following axillary node dissection for lumpectomy patients Synchronous bilateral breast cancer eligible If tumor is at least 2 cm, then nodes not involved If no tumor is at least 2 cm, then at least 1 node must be involved Both invasive primaries receptor-positive Previously treated, noninvasive breast cancer eligible No prior invasive breast cancer No adenoid cystic, squamous, or sarcomatous histology Hormone receptor status: Estrogen- or progesterone-receptor positive, i.e.: At least 10 fmole/mg cytosol protein by ligand-binding assay OR Receptor positive by immunocytochemistry

PATIENT CHARACTERISTICS: Age: 65 and over OR Postmenopausal and ineligible/inappropriate for or declined other active node positive adjuvant studies Sex: Female Menopausal status: Postmenopausal, defined as: At least 1 year since last menstrual period Hysterectomized with bilateral oophorectomy Hysterectomized with 1 or both ovaries remaining and either: Over 60 FSH in postmenopausal range Not surgically castrated, under 60, and on HRT FSH elevated 2 weeks after HRT discontinued Performance status: Not specified Life expectancy: At least 7 years except for breast cancer Hematopoietic: WBC greater than 3,000/mm3 Platelet count at least 100,000/mm3 Hemoglobin at least 10 g/dL Hepatic: Bilirubin no greater than 1.5 mg/dL AST less than 2 times normal Renal: Creatinine no greater than 2.0 mg/dL BUN no greater than 25.0 mg/dL Other: No extensive macular degeneration on exam within 1 year of entry, e.g.: No exudative or atrophic macular lesions that reduce corrected vision to less than 20/40 Health adequate for protocol treatment No nutritional supplementation except single daily multivitamin No other vitamin A supplements Gynecologic exam within the past year required of women who retain a uterus No second malignancy within the past 10 years except: Inactive nonmelanomatous skin cancer Carcinoma in situ of the cervix Prior noninvasive contralateral breast cancer

PRIOR CONCURRENT THERAPY: No prior chemotherapy or hormonal therapy for breast cancer except: Up to 1 month of tamoxifen if started by a non participating physician At least 2 weeks since hormone replacement therapy No concurrent megestrol