Earnings Releases

Brown Shoe Reports 77 Percent Increase in Earnings for 3rd Quarter 2002;
Broad Based Strength Led by Famous Footwear Rebound;
Raises Full-Year Earnings Guidance

ST. LOUIS, November 19, 2002 -- Brown Shoe Company, Inc. (NYSE:BWS) today reported net earnings increased 77 percent to $21,022,000 for the third fiscal quarter ended November 2, 2002, versus $11,851,000 for the year-ago quarter. Earnings per diluted share climbed to a record $1.18 from $0.68 last year, exceeding previously announced expectations.

Consolidated net sales for the quarter increased 5.2 percent to $486,318,000 versus $462,361,000 for the year-ago quarter.

"This quarter truly demonstrates the progress we’ve made in improving the earnings leverage at Brown Shoe Company. Like last quarter, we again earned significantly more on our sales base," said Chairman and CEO Ron Fromm. "Famous Footwear is beginning to realize the benefits from its aggressive merchandising strategy and inventory management initiatives, achieving operating earnings in the quarter, up nearly 60 percent over year-ago levels. In addition, our wholesale businesses performed exceptionally in a very tough consumer environment. Strong operations together with improved operating platforms contributed to a record third-quarter EPS."

Fromm continued, "Moreover, we expect the positive momentum to carry over into the fourth quarter. Therefore, we are increasing our guidance for fiscal 2002 earnings per share-- to the range of $2.30 to $2.35, versus $2.15 to $2.20 previously estimated."

In 2001, Brown Shoe began implementation of enterprise-wide initiatives, called Project IMPACT, to reengineer inventory management processes, improve logistics systems, eliminate redundant infrastructure and better leverage its operating platform.

IMPACT initiatives have allowed Brown Shoe to reduce inventory levels at quarter-end by 14 percent, or $64 million, to $381 million versus $445 million at the same time last year -- with $56 million of that reduction coming from Famous Footwear. Total debt has been lowered by $77 million to $160 million from $237 million at quarter-end last year, and interest costs were reduced by $2.0 million, to $2.8 million versus $4.8 million in the year-ago period.

Third Quarter Retail Results
As previously reported, sales at Famous Footwear, the company's 922-store family footwear chain, increased 4.8 percent to $294,535,000 for the quarter versus $280,942,000 for the year-ago period. Operating earnings for Famous Footwear were up 59.2 percent to $22,585,000 versus $14,189,000 for the year-ago quarter, despite a 0.6 percent decrease in same-store sales. This improvement was due to increased customer purchase ratios and higher margins throughout the important back-to-school period as well as lower inventories and a higher annualized inventory turn rate.

Third quarter sales for the company's 404 Naturalizer stores in the U.S. and Canada were $49,898,000 versus $52,159,000 for the year-ago period, on a store base of 15 percent fewer stores. During the quarter, the division achieved operating earnings of $1,529,000, compared to a loss of $1,354,000 for the year-ago quarter. Same-store sales were up 10.8 percent for ongoing stores in the U.S and down 6.3 percent in Canada.

"We are particularly pleased with the strengthening business in the U.S. Naturalizer chain. The fall Naturalizer collection has seen terrific sell-throughs across all categories," Fromm noted.

Third Quarter Wholesale Results
Wholesale sales for the quarter were $140,795,000, up 9.2 percent versus $128,915,000 last year. Sales gains came from Naturalizer, the Buster Brown & Co. children's business, and men’s and athletics footwear. Brown Shoe's wholesale businesses sell branded, private label and licensed footwear for women, men and children in the U.S., Canada and several international markets.

Operating earnings for the wholesale businesses were $12,694,000 compared to $12,308,000 for the prior-year quarter. The 3.1 percent gain in wholesale operating earnings reflects the strong business at Naturalizer, that was partially offset by higher marketing and incentive plan costs and difficult Canadian business results.

"Our flagship Naturalizer brand had a 25 percent increase in wholesale sales for the quarter. The brand’s market share in U.S. department stores remains up versus last year, and sell-throughs are strong in all categories. Further, unfilled orders for the entire wholesale division are running up 37 percent versus last year," Fromm said.

Update on IMPACT Initiatives
Brown Shoe continues to make progress in implementing its enterprise-wide Project IMPACT initiatives to improve its inventory management, logistics processes and reduce its expense base.

• The company, again this quarter, achieved its targeted inventory reduction levels.
• Inventory mix and freshness at Famous Footwear were significantly improved, as "turn" rates continue to run 25 percent ahead of last year.
• Distribution systems efficiencies are being realized as a new enterprise-wide transportation management system is implemented this month.
• The company's Shared Services platform was implemented across its accounting functions this quarter, increasing efficiency and consolidating functions.
• The company has closed 92 of the 106 under-performing U.S. Naturalizer stores it has targeted for closure under IMPACT, and expects to have the remaining stores closed by year-end.

Nine Months Results
For the first nine months of 2002, net earnings were up 49 percent, to $35,824,000 or $2.01 per diluted share, compared to $24,057,000 or $1.37 per diluted share, the year before. Sales increased 3.6 percent during the nine-month period to $1,389,311,000 compared to $1,340,578,000 last year.

For the nine month period, sales increased 3.7 percent at Famous Footwear to $832,896,000; decreased 5.3 percent at Naturalizer Retail (U.S. and Canada) to $149,375,000, on a smaller store base, and increased 6.5 percent at wholesale to $403,824,000. Operating earnings for the nine months increased 69.2 percent to $40,237,000 at Famous Footwear; increased 1.2 percent for Wholesale to $37,760,000, and improved 162.3 percent for Naturalizer Retail, which posted earnings of $240,000.

Forward-looking Guidance
With respect to forward-looking guidance, the company is increasing its earnings per share guidance for fiscal 2002 to be in the range of $2.30 to $2.35, versus $2.15 to $2.20 previously estimated. Looking ahead to fiscal 2003, the company remains comfortable with its earnings per share guidance estimate of $2.75.

Third Quarter Earnings and Conference Call
Brown Shoe will hold a conference call to discuss these results today at 4:30 p.m. EST. While the question-and-answer session of the call will be limited to institutional analysts and investors, retail brokers and individual investors are invited to attend via a live web-cast to be hosted at http://www.companyboardroom.com. At the website, click on the Individual Investor Center to locate the broadcast.

Safe Harbor Statement Under the Private Securities Litigation Reform 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 $1.76 billion footwear company with worldwide operations. The company operates the 900-store Famous Footwear chain, which sells brand name shoes for less. It also operates 400 Naturalizer stores in the U.S. and Canada that sell the Naturalizer brand of shoes and accessories. Brown Shoe, through its wholesale divisions, owns and markets leading footwear brands including Naturalizer, LifeStride, Connie, Buster Brown; it also markets licensed brands including Dr. Scholl's and Carlos by Carlos Santana for adults, and Barbie, Star Wars, Spider-Man and Bob-the-Builder character footwear for children.





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