Stride Rite Reports Increased First Quarter Sales and Profits



    LEXINGTON, MASS., March 29 /CNW/ - The Stride Rite Corporation (NYSE:  
SRR) today reported record first quarter fiscal 2007 sales of $194.7 million,
an increase of 6% compared to the same period in the prior year. Net income
for the first quarter totaled $11.1 million or $.30 per diluted share,
compared to the net income of $8.3 million or $.22 per diluted share in the
first quarter of 2006.

    The first quarter financial results include a pre-tax expense of $0.3
million related to Robeez integration costs. The prior year first quarter
financial results included a pre-tax expense of $2.6 million related to the
flow through of the remaining write-up of inventory purchased in the Saucony
acquisition as required by GAAP accounting rules. In addition, the prior year
first quarter results included pre-tax Saucony acquisition related integration
expenses of $1.2 million.

    Excluding acquisition-related integration costs, net income would have
been $11.3 million for the first quarter, while diluted earnings per share
remain at $.30 for the first quarter of fiscal 2007. Excluding
acquisition-related integration costs and the Saucony inventory write-up, net
income would have been $10.6 million for the first quarter of fiscal 2006,
while diluted earnings per share would have been $.28. See the section
entitled "Non-GAAP Pro Forma Financial Measures" and the "Reconciliation of
Non-GAAP Measures" provided in this release for an additional description of
these Non-GAAP Measures.

    David Chamberlain, Chairman and CEO of Stride Rite commented, "Although
we made progress in the first quarter, the uneven retail environment had an
effect on the first quarter results.

    "The combined Children's Group first quarter sales increased 9% compared
to last year. The Children's Retail Group sales were up 14% in the quarter.
Same store comps were up 6.3%. February retail sales were helped by an earlier
start to our annual pre-Easter promotion. We expect retail to continue with
positive comps for the year. However, wholesale sales were down 1%. The
introduction of our Saucony children's line in December has enjoyed a solid
start in both our stores and wholesale businesses. Over time, this should
allow us to open new distribution. We remain on target to turn in another year
of growth in our Stride Rite children's business.

    "Keds had a weak first quarter, with sales down 9%. The new, younger
product offerings met expectations, but could not offset the decline in
women's core product and lower children's sales. We anticipate an improving
sales trend for the remainder of the year.

    "Sperry Top-Sider, up 10%, enjoyed another strong quarter of sales. Our
products are performing well. We expect a year of solid growth.

    "Saucony domestic sales were up 6% over a year ago. We are seeing
excellent response to our updated technical running lines, particularly in the
Triumph, Omni and Hurricane models, which all feature our new ProGrid
technology. We feel positive about the steps we are taking to build Saucony.

    "International sales were up 2%. Keds continues to enjoy strong sales
growth in Europe, Canada and Australia. The Mischa Barton campaign and younger
products are driving the Keds momentum.

    "Our Tommy Hilfiger footwear sales were 4% above last year. We are
pleased with the progress of the Tommy Hilfiger brand. However, we remain
cautious in our outlook for the year.

    "Robeez results met expectations for the quarter."

    Mr. Chamberlain continued, "The strength of our brands and the
acquisition of Robeez has provided sales growth in the quarter. We are
committed to delivering the financial results this year, while we invest to
support long-term growth. Assuming reasonable retail and economic conditions
in 2007, we are reaffirming our projected sales growth of 5% to 8% and
earnings per share of $1.10 - $1.15, including a full year of Robeez financial
results and excluding any Robeez integration costs. Acquisition related
integration costs are estimated at approximately $1.0 million or $.02 per
diluted share for the year."

    NET SALES HIGHLIGHTS:

    --  Net sales for the quarters ended March 2, 2007 and March 3, 2006 are
summarized in the table as follows:

    
                         The Stride Rite Corporation
                           Net Sales (in thousands)

                                First Quarter
    ----------------------------------------------------------------------
                                                                Percentage
                                              2007      2006      Change
                                            --------- --------- ----------
                                                (Unaudited)

    Stride Rite Children's Group -
     Wholesale                               $20,980   $21,156        (1)%
    Stride Rite Children's Group - Retail     43,130    37,924         14%
                                            --------- --------- ----------
    Stride Rite Children's Group - Combined   64,110    59,080          9%

    Keds                                      38,097    41,991        (9)%
    Sperry Top-Sider                          26,015    23,588         10%
    International                             23,295    22,818          2%
    Saucony                                   22,412    21,075          6%
    Hind                                       2,415     3,488       (31)%
                                            --------- --------- ----------
    Other Wholesale - Combined               112,234   112,960        (1)%

    Tommy Hilfiger Adult                      15,472    14,933          4%

    Robeez                                     7,084         -        100%

    Intercompany Eliminations                 (4,229)   (3,557)       n/a
                                            --------- --------- ----------
    Total                                   $194,671  $183,416          6%
                                            --------- --------- ----------
    

    --  Stride Rite Children's Group-Wholesale net sales were down 1% for the
quarter as compared to the prior year. This decrease was primarily
attributable to decreased sales of first quality products, mainly in the
Stride Rite and Tommy Hilfiger product lines, as well as a decrease in
closeout products sales. Offsetting these declines were positive sales of
Sperry Top-Sider and Saucony children's products.

    --  Net sales of the Stride Rite Children's Group-Retail division
increased 14% in the first quarter versus the prior year. Sales at comparable
Children's Group retail stores (open 52 weeks in each fiscal year) increased
6.3% for the first quarter of 2007. At quarter-end, the Stride Rite Children's
Group-Retail operated 322 stores, including 15 Saucony stores. This is a net
increase of 26 stores, or 9% from the comparable period last year.

    --  Net sales in the Keds division decreased 9%. The Keds sales decline
was primarily attributable to a decrease in women's core product sales in the
mid-tier and value sales channels, as well as lower children's sales. The
younger product offerings have performed well.

    --  Sperry Top-Sider net sales increased 10% for the first quarter on
higher sales of men's and women's products.

    --  Saucony domestic net sales were up 6% for the first quarter of 2007.
Saucony technical running and athletic products performed well in the quarter.

    --  The Stride Rite International division's net sales growth of 2% in
the first quarter of fiscal 2007 was primarily the result of strong sales of
Saucony and Keds products in Europe, as well as Keds sales increases in
Canada.

    --  Net sales of Tommy Hilfiger products for the first quarter increased
4% with positive trends in both women's and men's product lines.

    OTHER FINANCIAL HIGHLIGHTS:

    --  The gross profit rate of 40.8% was improved 0.9 percentage points
compared to 39.9% reported in the comparable period in 2006. The prior year
gross profit rate was negatively impacted 1.5 percentage points by the $2.6
million flow through of the remaining acquired Saucony inventory write-up to
fair value. The current year gross profit margin was adversely affected by
increased promotional activity in our Stride Rite children's company-owned
retail stores and a shift in product mix.

    --  Operating expenses increased 3% for the quarter. As planned, the
major operating cost increases were related to Robeez expenses, investments in
European operations and Stride Rite Children's Group-Retail store expansion.

    --  Operating income increased 31% on a GAAP basis and was up 5%
excluding the acquisition related integration costs of $0.3 million and $1.2
million for 2007 and 2006, respectively and the $2.6 million flow through of
the remaining acquired Saucony acquisition related inventory write-up to fair
value in 2006.

    --  Accounts receivable increased 6% compared to last year consistent
with the sales increase in the quarter. DSO was 56 days, which is flat versus
the comparable period last year.

    --  Inventories of $127 million were up 10% versus the comparable period
of 2006. The increase was due in part to the addition of Robeez and the timing
of certain product receipts.

    --  Cash and cash equivalents were $20 million at the end of the first
quarter with $99 million in outstanding debt. The outstanding debt increase
versus our 2006 year-end balance is related primarily to building inventory
for spring sales.

    --  The Company did not repurchase any common shares under the share
repurchase program during the first quarter. As of March 2, 2007 we had
approximately 3.0 million shares remaining on our share repurchase
authorization.

    COMPANY OVERVIEW & CONFERENCE CALL INFORMATION:

    The Stride Rite Corporation markets the leading brand of high quality
children's shoes in the United States. Other footwear products for children
and adults are marketed by the Company under well-known brand names, including
Keds, PRO-Keds, Sperry Top-Sider, Robeez, Tommy Hilfiger, Saucony,
Grasshoppers, Munchkin and Spot-bilt. Apparel products are marketed by the
Company under the Saucony and Hind brand names. Information about the Company
is available on our website - www.strideritecorp.com. The Company will provide
a live webcast of its first quarter conference call. The live broadcast of
Stride Rite's quarterly conference call will be available on the Company's
website and at www.streetevents.com, beginning at 10:00AM ET on March 29,
2007. An on-line replay will follow two hours after the call and will continue
through April, 5 2007. Information about the Company's brands and product
lines is available at: www.striderite.com, www.keds.com,
www.sperrytopsider.com, www.robeez.com, www.grasshoppers.com, www.saucony.com,
and www.hind.com.

    SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995:

    This press release includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended and Section 21E of
the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. These forward-looking statements,
including, but not limited to, statements regarding upcoming product lines,
division sales expectations, growth expectations, and sales growth for the
Company, reflect our current views with respect to the future events or
financial performance discussed in the release, based on management's beliefs
and assumptions and information currently available. When used, the words
"believe", "anticipate", "estimate", "project", "should", "expect", "appear"
and similar expressions, which do not relate solely to historical matters
identify forward-looking statements. Investors are cautioned that
forward-looking statements are subject to risks, uncertainties and assumptions
and are not guarantees of future events or performance, which may be affected
by known and unknown risks, trends and uncertainties, and should not place
undue reliance on these statements. Should one or more of these risks or
uncertainties materialize, or should our assumptions prove incorrect, actual
results may vary materially from those anticipated, projected or implied.
Factors that may cause or contribute to such differences include, among
others: international, national and local general economic, political and
market conditions; our reliance on independent manufacturers in China and
potential disruptions in such manufacturing caused by difficulties associated
with political instability in China, the occurrence of a natural disaster or
outbreak of a pandemic disease in China, labor shortages or work stoppages,
and changes in duty structures; the impact of changes in the value of foreign
currencies, including the Chinese Yuan; the possible failure to retain the
Tommy Hilfiger footwear license or other current license agreements; the
possible failure to successfully integrate the Robeez brand into the Company
operations; increased leverage from the financing of our recent acquisitions;
intense competition among sellers of footwear; delay in opening new stores; a
decline in the volume of anticipated sales; revenues from new product lines
may fall below expectations; a delay in the launch of new product lines; an
inability to achieve expected results for new retail concepts; general retail
sales trends may be below expectations; consumer fashion trends may shift to
footwear styles not currently included in our product lines; our retail
customers, including large department stores, may continue to consolidate or
restructure operations resulting in unexpected store closings; and additional
factors discussed from time to time in our filings with the Securities and
Exchange Commission (the "SEC"), all of which are available at the SEC's
website at www.sec.gov. We expressly disclaim any responsibility to update
forward-looking statements.

    NON-GAAP PRO FORMA FINANCIAL MEASURES:

    This release contains certain non-GAAP financial measures, specifically
non-GAAP historic and anticipated net income and diluted earnings per share,
each of which excludes certain cash and non-cash charges. These non-GAAP
financial measures are used by management to evaluate the Company's historical
and prospective financial performance and to indicate underlying trends in the
Company's business. Although the non-GAAP measures provided by the Company may
be different from the non-GAAP measures provided by other companies,
management believes that these non-GAAP financial measures provide useful
information to investors because, by excluding non-cash items related to the
write-up to fair value of inventory and one-time cash items related to
integration costs of the Company's recent acquisitions, it provides investors
with a better understanding of the performance of the Company and allows
investors to evaluate the effectiveness of the methodology and information
used by management in its financial and operational decision-making. These
non-GAAP financial measures should be considered in addition to results
prepared in accordance with GAAP, but should not be considered a substitute
for or superior to GAAP results. The GAAP measures most directly comparable to
the non-GAAP measures are net income and diluted earnings per share.

    
                         The Stride Rite Corporation
                       Summarized Financial Information
            for the periods ended March 2, 2007 and March 3, 2006
                             Statements of Income

    (in thousands)                                        First Quarter
                                                       -------------------

                                                         2007      2006
                                                       --------- ---------
                                                           (Unaudited)
     Net sales                                         $194,671  $183,416
     Cost of sales                                      115,181   110,184
                                                       --------- ---------
     Gross profit                                        79,490    73,232
     Selling and administrative expenses                 60,799    58,910
                                                       --------- ---------
     Operating income                                    18,691    14,322
     Other income (expense), net                         (1,050)     (823)
                                                       --------- ---------
     Income before income taxes                          17,641    13,499
     Provision for income taxes                           6,546     5,214
                                                       --------- ---------
     Net income                                         $11,095    $8,285
                                                       --------- ---------

    Earnings per share:
        Diluted                                           $0.30     $0.22
        Basic                                             $0.30     $0.23

    Weighted average shares outstanding:
        Diluted                                          37,537    37,703
        Basic                                            36,556    36,588

                                Balance Sheets

                                                          First Quarter
                                                       -------------------

                                                         2007      2006
                                                       --------- ---------
    Assets:                                                (Unaudited)
    Cash and cash equivalents                           $19,982   $23,219
    Accounts receivable                                 128,733   121,098
    Inventories                                         126,651   115,594
    Deferred income taxes                                14,275    14,262
    Other current assets                                 17,048    18,074
                                                       --------- ---------
         Total current assets                           306,689   292,247
    Property and equipment, net                          52,950    51,625
    Goodwill                                             70,257    56,732
    Trademarks                                           71,890    58,590
    Other assets                                         18,731    19,301
                                                       --------- ---------
         Total assets                                  $520,517  $478,495
                                                       --------- ---------
    Liabilities and Stockholders' Equity:
    Current liabilities                                  74,237    67,765
    Long-term debt                                       98,500    95,000
    Deferred income taxes and other liabilities          39,840    38,934
    Stockholders' equity                                307,940   276,796
                                                       --------- ---------
         Total liabilities and stockholders' equity    $520,517  $478,495
                                                       --------- ---------
    

    
                         The Stride Rite Corporation
                     Reconciliation of Non-GAAP Measures
                      (in thousands, except share data)

                     For the Quarter Ended March 2, 2007

                                                                 Adjusted
                                     Reported                     Results
                                      First                       First
                                      Quarter                     Quarter
                                       2007    Adjustments         2007
                                     --------- -----------       ---------

      Net sales                      $194,671                    $194,671

      Operating income                 18,691        $320   (a)    19,011

      Provision for income taxes        6,546         134   (b)     6,680

      Net income                      $11,095        $186 (a),(b) $11,281
     Earnings per share:
         Diluted                        $0.30                       $0.30
         Basic                          $0.30                       $0.31
     Weighted average shares outstanding:
         Diluted                       37,537                      37,537
         Basic                         36,556                      36,556


     Pro forma adjustments:

     (a) Robeez integration expenses $.3 million (pre-tax).

     (b) Income tax effect at the incremental rate.
    

    
                         The Stride Rite Corporation
                     Reconciliation of Non-GAAP Measures
                      (in thousands, except share data)

                     For the Quarter Ended March 3, 2006

                                                                 Adjusted
                                     Reported                     Results
                                      First                       First
                                      Quarter                     Quarter
                                       2006    Adjustments         2006
                                     --------- -----------       ---------

      Net sales                      $183,416                    $183,416

      Operating income                 14,322      $3,785   (a)    18,107

      Provision for income taxes        5,214       1,461   (b)     6,675

      Net income                       $8,285      $2,324 (a),(b) $10,609
     Earnings per share:
         Diluted                        $0.22                       $0.28
         Basic                          $0.23                       $0.29
     Weighted average shares
      outstanding:
         Diluted                       37,703                      37,703
         Basic                         36,588                      36,588


     Pro forma adjustments:

     (a) Flow through of the Saucony inventory write-up to fair value $2.6
      million and Saucony integration expenses $1.2 million (pre-tax).

     (b) Income tax effect at the effective rate.
    




For further information:

For further information: The Stride Rite Corporation Frank A. Caruso,
617-824-6611 Chief Financial Officer

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THE STRIDE RITE CORPORATION

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