Earnings Releases

Brown Shoe Reports 24 Percent Increase in Earnings for Second Quarter 2002; Major Gains Come from IMPACT Initiatives

ST. LOUIS, MO, August 20, 2002 - Brown Shoe Company, Inc. (NYSE: BWS) reported net earnings increased 24 percent to $7,169,000 for the second fiscal quarter ended August 3, 2002, compared to year-ago earnings of $5,795,000. Earnings per diluted share for the period were up 21 percent to $0.40 from $0.33 per diluted share last year.

Consolidated net sales for the second quarter of 2002 were $456,255,000 compared to $442,079,000 in last year's second quarter, an increase of 3.2 percent.
For the first half of fiscal 2002, net earnings were up 21 percent, to $14,802,000 or $0.83 per diluted share, from $12,206,000, or $0.69 per diluted share, the year before. Sales increased 2.8 percent during the six months to $902,993,000 compared with $878,217,000 last year.

"As projected, we are earning significantly more on our sales base due to the success of our IMPACT initiatives," said Brown Shoe Chairman and CEO Ron Fromm. "While the benefits of our strategy were evident during this tough consumer environment, we believe that when consumer spending returns to more normal levels, we will be well positioned to leverage additional earnings from our retail businesses."

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

"These initiatives have allowed us to reduce our inventory levels at quarter-end by 17 percent or $86.8 million versus the same period last year -- with $71.6 million of that reduction coming from Famous Footwear. We've also lowered total debt by $60.3 million for the period, and reduced interest costs by $2.2 million versus the year-ago period," Fromm said.

"On the wholesale side, Naturalizer had a 15 percent increase in wholesale sales for the quarter. Further, the brand again significantly increased its market share in U.S. department stores, where our Dune border stitch sandal was the number one-selling women's shoe in the months of May and June," Fromm said.

Second Quarter Retail Results
As previously reported, total sales at Famous Footwear, the company's 920-store family footwear chain, rose to $270,756,000 for the quarter, from $266,433,000 for the same 13-week period last year. Same-store sales for the period were down 2.2 percent. Operating earnings for the chain improved to $6,861,000, versus a year-ago operating loss of $262,000.

"This gain in operating profitability was driven by IMPACT initiatives, through which we are steadily rebuilding the chain's operating margins with a goal to surpass former levels. To-date we have improved the quality and freshness of our inventory, allowing us to achieve higher sell-through rates with dramatically lower inventory levels," Fromm said. "While consumer traffic levels were down for the quarter, the chain achieved higher sales conversion ratios, increased inventory 'turn' rates, and better margins."

Naturalizer Retail, the company's 412-store chain selling the Naturalizer brand of women's shoes in both the U.S. and Canada, posted combined second quarter sales of $50,204,000 compared to $54,567,000 for the same period last year, on a base of 60 fewer stores. Same-store sales declined 3.4 percent during the quarter for the 220 ongoing U.S.-based stores, and 6.8 percent for the 168 Canadian stores. Operating earnings for the quarter were $33,000 compared to $1,530,000 a year-ago, primarily due to same-store sales decreases and weaker Canadian retail business.

Second Quarter Wholesale Results
Wholesale sales for the quarter were $134,207,000, up 11.0 percent versus $120,889,000 last year. Sales gains came from Naturalizer, LifeStride, the Buster Brown & Co. children's division, and Dr. Scholl's licensed 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 $13,168,000 compared to $13,658,000 for the prior-year quarter. As anticipated, wholesale operating earnings declined slightly due to increased margin pressure in both the department store and mass market channels. Also contributing were higher divisional incentive plan costs this year, as well as difficult market conditions and lower wholesale margins in Canada.

Update on IMPACT Initiatives
Brown Shoe is well along in implementing its enterprise-wide 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 have increased by nearly 25 percent this year.
• Distribution systems efficiencies are being realized as both Famous Footwear and the wholesale divisions work to streamline their logistics and better regulate product flow through distribution centers.
• The company's Shared Services platform has been implemented for human resources, and currently is being implemented across its accounting functions.
• The company has closed 79 of the 97 under-performing Naturalizer stores it targeted for closure under IMPACT, and expects to have the remaining stores closed by year-end.

Forward-Looking Guidance:
With respect to forward-looking guidance, the company anticipates that efficiencies gained from its IMPACT initiatives and continuing strength in its wholesale businesses will offset lagging consumer traffic levels and flat to down low single-digit same-store sales comparisons at Famous Footwear during the back-to-school period and the third quarter. Brown Shoe therefore estimates earnings per share will be in the range of $0.90 to $1.00 for the third quarter, and believes its earnings guidance of $2.10 to $2.15 per share for the full year will be achieved.

Pursuant to the Securities and Exchange Commission's order that CEOs and CFOs of the largest public companies certify the accuracy and completeness of their company's disclosures in SEC filings, Brown Shoe CEO Ron Fromm and CFO Andy Rosen announced they will sign the certifications when the company makes its next SEC filing, no later than the required date of September 17, 2002.

Second Quarter Earnings and Conference Call
Brown Shoe will hold a conference call to discuss these results today at 4:30 p.m. Eastern Time. 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, type in BWS 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. Brown Shoe press releases are available on the company's web site at www.brownshoe.com.