Earnings Releases

Brown Group, Inc.reported net earnings of $3,530,000 or 20 cents per share in the second fiscal quarter ended August 2, 1997 compared to net earnings of $5,514,000 or 31 cents per share in the 1996 second quarter.

ST. LOUIS, Mo. (WIRE NEWS), August 26, 1997 -- Brown Group, Inc. (NYSE: BG) reported net earnings of $3,530,000 or 20 cents per share in the second fiscal quarter ended August 2, 1997 compared to net earnings of $5,514,000 or 31 cents per share in the 1996 second quarter.

Consolidated net sales for the second quarter of 1997 were $378,823,000 compared to $389,983,000 in last year's second quarter. For the first six months of fiscal 1997, earnings were $5,072,000 or 29 cents per share, compared to earnings of $6,041,000 or 34 cents per share for the first six months of fiscal 1996.

Consolidated net sales for the first half of fiscal year 1997 were $770,638,000 compared to $745,768,000 in last year's first half. Announcement of these results was made by B. A. Bridgewater, Jr., Chairman of the Board, President and Chief Executive Officer, who said:

"Brown Group's lower sales and earnings in the second quarter principally resulted from declines at the Pagoda division, which successfully marketed footwear related to Disney's 'Hunchback of Notre Dame' movie in the corresponding quarter last year. Famous Footwear's retail business was also below plan, as the back-to- school business surge has developed later in 1997. Brown's Branded divisions and the Naturalizer Retail business recorded encouraging gains in the quarter.

"A $22 million sales decline, and an operating loss at Pagoda were reflected in the results of Brown Shoe Company's combined wholesale operations -- Brown Branded Marketing and Pagoda -- which reported sales of $110.2 million for the quarter, down 17.5 percent from last year's second quarter sales of $133.6 million. The second quarter sales decline at Pagoda was partially offset by sales related to Lucasfilm's 'Star Wars' trilogy in the first quarter this year. Brown Shoe Company's operating earnings in the quarter were $3.0 million which reflects a 48.5 percent decline from last year. However a 37.6 percent increase in operating earnings was achieved by the Brown Branded Marketing division in the quarter, due to improved margins and continuing improvements in expenses.

"At Famous Footwear, sales of $213.7 million were up 6.6 percent in the second quarter with a slight same-store sales decline of .2 percent. Operating earnings for the quarter were $7.5 million, a 15.5 percent decline from the same period last year. The decline is largely the result of the later-than-planned start to the back-to-school season, and a generally more promotional marketplace, particularly in branded athletic footwear. Measures of operating efficiency improved during the quarter. In the first six months of 1997, operating earnings increased 17.2 percent to $14.2 million from $12.2 million last year on a 7.7 percent sales gain and a same-store sales gain of 1.5 percent. There were 803 stores in operation at quarter-end. "At Brown Shoe Company's Naturalizer Retail division, good expense control led to operating earnings of $.9 million for the second quarter compared to $.4 million last year, and the division was in the black for the quarter. These results were achieved despite a 1.4 percent sales decline to $34.8 million and a 1.6 percent same-store sales decline for the quarter. At quarter-end, there were 348 stores in operation.

"The company's Canadian Operations continued their steady performance in the second quarter, with sales of $20.1 million and operating earnings of $2.4 million, both about even with last year's second quarter results. Operating earnings were up 28.0 percent at the Canadian Retail operations due to a 7.1 percent same-store sales gain. These results were offset by lower shipments at the Canadian Wholesale division, where operating earnings were below last year's level.

"Looking ahead, we are cautiously optimistic regarding prospects for the second half. The back-to-school season at Famous Footwear, although late, has picked up momentum in August; our wholesale brands, especially Naturalizer and NaturalSPORT, are selling well, and we anticipate a good Fall season at wholesale. Our balance sheet is solid, our management of cash flow continues to be better than planned, and inventories are tightly controlled. We continue to plan cautiously for what will continue to be a highly promotional footwear marketplace, but we believe we are well-positioned as we move into the second half of the 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 from time to time contain detailed information relating to such factors.

Brown Group, Inc. 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, Life Stride, NaturalSPORT, the Larry Stuart Collection, le coq sportif athletic footwear, and licensed brands including Dr. Scholl's, Star Wars and Disney character footwear.

Brown Group, Inc. press releases are available by fax through PR Newswire's Company News On-Call fax service at 800-758-5804, extension 109435.

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