Earnings Releases

Brown Shoe Reports 14.5 Percent Increase in Third Quarter Net Income

ST. LOUIS, Mo. (WIRE NEWS), November 17, 1999 -- Brown Shoe Company, Inc. (NYSE:BWS) reported that net income for the fiscal third quarter ended October 30 increased 14.5 percent to $14,763,000 from $12,898,000 the year before, reflecting continuing strength of its 849-store Famous Footwear operations. Diluted earnings per share rose 12.5 percent to 81 cents from 72 cents.

Consolidated net sales for the quarter were up 4.2 percent, to $429,132,000 from $411,976,000.

"The third quarter represented an extension of Famous Footwear's trend of record sales and earnings, following record results for the last fiscal year and the first half of this year," commented Ronald A. Fromm, Chairman of the Board, President and Chief Executive Officer. "Driven by a strong back-to-school season, Famous' operating earnings rose nearly 27 percent to $23,531,000."

Famous Footwear sales, led by athletic footwear, children's footwear, as well as women's sandals and juniors, showed a gain of nearly 10 percent, to $263,136,000. Same-store sales were up 3.7 percent. "Famous Footwear's expansion plans are on track, and we expect to have 870 stores in operation by year-end," Fromm said.

The improved performance more than offset lower operating results at the wholesale and Naturalizer Retail operations.

Operating earnings for the wholesale businesses, which include the Brown Branded, Brown Pagoda and the company's Canadian wholesale operations, decreased 28.4 percent to $8,809,000, with sales down slightly to $116,715,000 from $119,241,000. This decline in operating earnings reflected an increased marketing investment at Brown Branded related to the new, updated Naturalizer product. Sales of Naturalizer product were up by 16 percent in the quarter.

"We are encouraged by the progress of the Naturalizer brand," said Fromm. "This has been an ambitious rejuvenation of a 72-year-old brand, and we are now beginning to see results at retail."

Sales for the company's 481 Naturalizer stores in the U.S. and Canada rose 0.8 percent in the quarter to $46,649,000. While same-store sales declined 1.5 percent in the U.S. and 8.7 percent in Canada, the U.S. stores saw a same-store gain in October, reflecting availability of the new, updated Naturalizer product. The division's operating loss increased to $1,956,000 for the quarter due to the lower same-store sales and higher marketing costs associated with an expanded customer catalog and new store merchandizing presentations to reflect the updated Naturalizer image.

The income tax rate in the third quarter of 1999 was 33.1 percent compared to 40.4 percent last year. This decreased rate reflects the effect of non-taxable losses incurred at the Pagoda International Division last year.

"Cash flow from operations, which totaled $19 million year-to-date, remains strong," Fromm noted. "Our balance sheet showed continued strength, with our net debt-to-capital ratio improving to 37.4 percent."

Fromm concluded, "We enter the fourth quarter with optimism as we expect the momentum we have generated at Famous Footwear to continue. We also are encouraged with the outlook of our Brown Branded and Brown Pagoda businesses. While the environment remains competitive, we're exactly where we think we should be, and are confident that the company will meet analysts' consensus full-year earnings estimates."

For the nine months, net income climbed to $31,596,000, or $1.74 per diluted share from $21,064,000, or $1.18 per diluted share, with operating earnings of Famous Footwear and the wholesale businesses up 17.4 percent and 16.3 percent, respectively. Sales totaled $1,236,058,000 this year, compared with $1,197,903,000 last year.

Safe Harbor Statement Under the Private Securities Litigation Act of 1995: This press release contains certain forward-looking statements that are subject to various risks and uncertainties that could cause actual results to differ materially. These include general economic conditions, competition, consumer apparel and footwear buying trends, and political and economic conditions in Brazil and China, which are significant footwear sourcing countries. The Company's reports to the Securities and Exchange Commission contain detailed information relating to such factors.

Brown Shoe, is a $1.5 billion footwear company with worldwide operations. The Company operates the Famous Footwear, Naturalizer and F. X. LaSalle chains of footwear retail stores and markets leading brands including Naturalizer, LifeStride, Naturalsport, and licensed brands including Dr. Scholl's, Barbie, and Star Wars footwear.

Brown Shoe press releases are available by fax through PR Newswire's Company News On-Call fax service at 800-758-5804, extension 109435. Brown Shoe news also is available on the Company's Web site at http://www.brownshoe.com.