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 Breaking Headlines

Stride Rite 3Q Net Income Rose 24%

SEPTEMBER 27, 2005 -- Stride Rite's 3Q net sales were $146.2 million, an increase of 4%. Operating income in 3Q05 was $11.1 million, an 18% increase from the prior year's quarter. Net income totaled $7.7 million or 21¢ per diluted share, an increase of 24% compared to the net income, and 4¢ above estimates.

Sales of Sperry Top-Sider footwear increased 53% in 3Q. Sales of Keds and Tommy Hilfiger products decreased 9% and 27%, respectively. International sales increased 33%.

The company's gross profit percentage of 39.8% was up 330 basis points. Keds, Stride Rite Children's Group and Sperry Top-Sider all had strong gross profit percentage improvements versus last year. Operating expenses in 3Q increased 13%. As planned, the major operating cost increases for the period related to higher advertising costs and the Stride Rite Children's Group retail store expansion. Excluding those costs, operating expenses increased 3% versus last year.

The quarter-end balance sheet was strong. Accounts receivable was increased 1% compared to last year on a 4% quarterly sales increase. DSOs were 40 days, a decrease of three days versus the same period last year. Inventories of $86 million were up 7%. Net cash and marketable securities were $92 million, and the company had no outstanding debt at the end of 3Q.

David Chamberlain, COB/CEO, commented, "The third quarter was a nice reflection of the strength of our brands and product offerings, even as we work through the Keds repositioning. Children's Group store comps increased 7.4%, reflecting the strength of our retail strategy and our key product lines. The Children's Group wholesale business was impacted by declines in Tommy Hilfiger and Munchkin. We continue our strategy of opening additional doors and expect to have a net increase of 21 stores this year, up 8% from a year ago. Keds continues its transition to an active, upscale lifestyle brand. Their sales were down 9% for the quarter reflecting significantly fewer sales to the value channel and closeout retailers, reduced sales in the mid-tier channel and increased sales in premium department and specialty stores. We also continued the advertising campaign featuring Mischa Barton of 'The O.C.' into the fall season as part of our effort to attract younger customers.

"Sperry Top-Sider sales increased 53% for the quarter and are up 31% for the nine months. The quarter increase reflected growth in men's, women's and the outdoor and marine channels. Tommy sales, excluding PRO-Keds, which is now licensed, and the discontinued Tommy H line, were down 20% for the quarter. The decline was primarily in men's. International sales are up 33% for the quarter and 25% for the nine month period."

Chamberlain continued, "As previously announced, we completed the Saucony acquisition on September 16, '05 and are moving ahead quickly to implement our integration plans. Saucony expands Stride Rite's portfolio of nationally recognized footwear brands, and has excellent long-term growth potential. We expect the Saucony acquisition to be accretive to earnings starting in '06 before any non-cash purchase accounting inventory impact. In 4Q05, the acquisition is expected to be dilutive to earnings by approximately 4¢ per share before the non-cash purchase accounting inventory impact."


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Categories
Sporting goods industry
Operating costs
Advertising
Sales

Companies
Stride Rite Inc.
3Q Inc.
Keds Inc.
Tommy Hilfiger Company
Saucony Inc.

Concepts
net income
Stride Rite
non-cash purchase accounting inventory
International sales
operating expenses

People
David Chamberlain
Mischa Barton





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