Stride Rite Reports Increased First Quarter Sales and Solid Financial Results; Results Include Saucony Acquisition Related Char

The Stride Rite Corporation (NYSE: SRR) today reported
record first quarter fiscal 2006 sales of $183.4 million, an increase
of 22% compared to the same period in the prior year. Net income for
the first quarter totaled $8.3 million or $.22 per diluted share,
compared to the net income of $8.2 million or $.22 per diluted share
in the first quarter of 2005.
   The first quarter financial results includes a pre-tax expense of
$2.6 million related to the flow through of the write-up of inventory
purchased in the Saucony acquisition as required by GAAP accounting
rules. In addition, the current quarter includes pre-tax acquisition
related integration expenses of $1.2 million. Also, during the first
quarter, the Company adopted SFAS No. 123R, "Share-Based Payment", the
impact of which increased pre-tax expenses by approximately $700
thousand.
   Excluding acquisition related integration costs and the flow
through of the inventory write-up, net income would have been $10.6
million for the first quarter, while diluted earnings per share would
have been $.28. See the section entitled "Non-GAAP Pro Forma Financial
Measures" and the "Reconciliation of Non-GAAP Measures" provided in
this release for additional description of these Non-GAAP Measures.
   David Chamberlain, Chairman and CEO of Stride Rite, commented that
the first quarter of 2006 was a solid start to the year. "The positive
impact of Saucony sales and profits was evident in the quarter. We are
on schedule with our integration of the Saucony business. On March
20th we moved the Saucony associates into our Lexington, Massachusetts
headquarters and Saucony began shipping from our existing warehouse
facility in Louisville, Kentucky."
   "The Children's Group net sales were impacted by the later Easter
holiday this year and shifting of the preseason retail store event
into the second quarter. Our company-owned retail stores same store
growth percentages were down year-over-year as planned. March is off
to a good start, and we expect strong second quarter retail store
comparative sales to result in positive single digit comparative
retail store sales for the half. Our 2006 retail strategy includes the
addition of 33 new Stride Rite Children's stores for a total of 302
stores. In addition to the shift in the Easter holiday, our Stride
Rite Children's wholesale sales have been impacted by several factors
including: the changed strategy and buying patterns of certain
department stores, the consolidation of May Company by Federated
Department Stores, a shift in value channel strategy and a decline in
the number of smaller accounts. Although the later Easter this year
should result in improvement in the second quarter, we expect to
continue to be impacted by those same factors and anticipate Stride
Rite Children's wholesale sales to be down for the first half.
Overall, we remain on strategy to continue growth in our Stride Rite
children's business through new stores and positive same store
comparative sales. We are projecting to end the half with a combined
Stride Rite Children's Group sales increase."
   "Keds had a challenging first quarter. The moderate retail channel
stabilized while the premium department store channel fell below last
year, due to strong prior year sell-in. The value channel sales were
also below last year. We are encouraged that a number of retailers are
starting to enjoy solid Keds product movement and good profitability.
Our operating profit margins continued to improve nicely in the
brand."
   "Sperry Top-Sider enjoyed another strong quarter of sales and
profits. Our products are strong, and we expect growth across all
retail channels with particular success in the women's area. This
brand has a great deal of positive momentum that should continue
throughout the year."
   "Saucony domestic sales were in line with expectations as we
continue to see strength in technical running and international. We
feel positive about Saucony growth opportunities in 2007, including
originals and children's product expansion."
   "International had strong sales and profits, helped in part by
sales of Tommy Hilfiger products in Latin America and strong Saucony
sales in Europe and Canada."
   "Our Tommy Hilfiger footwear sales were impacted by the soft
business trends in the broader Tommy Hilfiger brand. We are focused on
maximizing that business as we look for opportunities to improve
profitability."
   "We had a solid start to 2006, building off the acquisition of
Saucony. The addition of Saucony sales to our other brands has
provided increased operating leverage. With sound strategies in place
and strong management teams, we anticipate a year of meaningful
progress and growth."
   Mr. Chamberlain continued, "Assuming reasonable retail and
economic conditions in 2006, we are reaffirming our projected sales
growth of 23% to 27% and earnings per share of $.82 - $.88, including
a full year of Saucony financial results. Included in the projected
earnings is the annual impact related to the expensing of stock
options, which is projected at approximately $.05 per diluted share.
In addition, these projections include the cost of sales impact
related to the flow through of the write-up of inventory purchased in
the Saucony acquisition, which reduced earnings per diluted share by
$.04 in the first quarter. Acquisition related integration costs are
estimated at approximately $2.5 million or $.04 per diluted share for
the year and are also included in the earnings projections."

   NET SALES HIGHLIGHTS:

   --  Net sales for the quarters ended March 3, 2006 and March 4,
        2005 are summarized in the table as follows:

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                      The Stride Rite Corporation
                       Net Sales (in thousands)

                                            First Quarter
                                            -------------
                                                              Percent
                                            2006      2005     Change
                                         ---------- --------- --------
                                             (Unaudited)

 Stride Rite Children's Group - Wholesale  $21,156   $25,586     (17)%
 Stride Rite Children's Group - Retail      37,924    35,445        7%
                                         ---------- --------- --------
 Stride Rite Children's Group - Combined    59,080    61,031      (3)%

 Keds                                       41,991    45,799      (8)%
 Sperry Top-Sider                           23,588    19,444       21%
 International (includes Saucony)           22,818     8,810      159%
 Saucony Domestic (includes Hind)           24,563         -      n/a
                                         ---------- --------- --------
 Other Wholesale - Combined                112,960    74,053       53%

 Tommy Hilfiger Adult                       14,933    18,121     (18)%

 Intercompany Eliminations                  (3,557)   (2,614)     n/a
                                         ---------- --------- --------
 Total                                    $183,416  $150,591       22%
                                         ========== ========= ========
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   --  Stride Rite Children's Group-Wholesale net sales decreased 17%
        for the quarter as compared to the prior year. This decrease
        was primarily attributable to the shift in the Easter holiday
        to second quarter, particularly in department stores and
        smaller independent retailers. In addition, fewer promotional
        product sales impacted the sales results.

   --  Net sales of the Stride Rite Children's Group-Retail division
        increased 7% in the first quarter versus the prior year. Sales
        at comparable Children's Group retail stores (open 52 weeks in
        each fiscal year) decreased 3.4% for the first quarter of
        2006. In the prior year, benefiting from the earlier Easter
        holiday and spring promotion, same store comparative sales
        increased 7.8% versus 2004. At quarter-end, the Stride Rite
        Children's Group-Retail operated 280 Stride Rite outlets and
        children's shoe stores. This is a net increase of 26 stores,
        or 10% from the comparable period last year. In addition,
        Stride Rite Children's Group-Retail also operated 16 Saucony
        outlet stores.

   --  Net sales in the Keds division decreased 8%. The strong prior
        year product sell-in to the premium channels and fewer sales
        this quarter in the value channel resulted in lower sales
        comparisons. Sperry Top-Sider net sales increased 21% for the
        first quarter on strong sales of men's and women's products,
        particularly in the marine and family shoe retail channels.
        Saucony net sales were $24.6 million for the first quarter of
        2006. Saucony technical running product sales were strong in
        the quarter.

   --  International net sales increased 159%, mostly due to the
        addition of Saucony international sales. Also contributing to
        the increase in international sales were higher sales of Tommy
        Hilfiger in Canada and Latin America, Keds footwear in Canada,
        and Sperry Top-Sider in Europe and South Africa.

   --  Net sales of Tommy Hilfiger men's and women's products for the
        first quarter decreased 18%, primarily due to a reductions in
        department store product sales, promotional product sales and
        an overall decline in the men's business. Last year's first
        quarter also had the sales of the Tommy H product line, which
        has since been discontinued.

   OTHER FINANCIAL HIGHLIGHTS:

   --  Excluding the flow through of the inventory write-up related
        to the Saucony purchase, the gross profit percentage increased
        1.2 percentage points to 41.4% for the quarter. Keds, Tommy
        Hilfiger, Sperry Top-Sider and International all had strong
        gross profit percentage improvements versus last year.

   --  Operating expenses increased 24% for the first quarter. As
        planned, the major operating cost increases were related to
        Saucony expenses, higher advertising costs and the Stride Rite
        Children's Group-Retail store expansion. Also contributing to
        the increase in operating expenses were integration costs and
        the impact of adopting SFAS No. 123R, "Share-Based Payment".

   --  Operating income increased 9% on a GAAP basis and was up 38%
        excluding the acquisition related integration costs ($1.2
        million) and the flow through of the inventory write up ($2.6
        million).

   --  Accounts receivable increased 34% compared to last year due to
        the addition of Saucony and higher sales in the last month of
        the quarter. DSO was 56 days, an increase of 4 days versus the
        same period last year. The DSO increase was due to the
        addition of Saucony which generally has offered somewhat
        longer credit terms to retailers.

   --  Inventories of $116 million were up 22% versus to the
        comparable period of 2005. The increase was due primarily to
        the addition of Saucony.

   --  Cash and cash equivalents were $23 million at the end of the
        fiscal quarter with $95 million in outstanding debt. The
        outstanding debt increase versus year end is related to
        building inventory for spring sales. The Company initially
        borrowed $85 million in mid-September 2005 to fund the
        acquisition of Saucony.

   COMPANY OVERVIEW & CONFERENCE CALL INFORMATION:

   The Stride Rite Corporation markets the leading brand of high
quality children's shoes in the United States. Other footwear products
for children and adults are marketed by the Company under well-known
brand names, including Keds, Sperry Top-Sider, Tommy Hilfiger,
Saucony, Grasshoppers, Munchkin, Spot-bilt and Hind. Apparel products
are marketed by the Company under the Saucony and Hind brand names.
Information about the Company is available on our website -
www.strideritecorp.com. The Company will provide a live webcast of its
first quarter conference call. The live broadcast of Stride Rite's
quarterly conference call will be available on the Company's website
and at www.streetevents.com, beginning at 10:00AM ET on March 30,
2006. An on-line replay will follow shortly after the call and will
continue through April 5, 2006. Information about the Company's brands
and product lines is available at www.striderite.com, www.keds.com,
www.sperrytopsider.com and www.saucony.com.

   SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995:

   This announcement includes forward-looking statements which
reflect our current views with respect to the future events or
financial performance discussed in the release, based on management's
beliefs and assumptions and information currently available. When
used, the words "believe", "anticipate", "estimate", "project",
"should", "expect", "appear" and similar expressions, which do not
relate solely to historical matters identify forward-looking
statements. Such statements are subject to risks, uncertainties and
assumptions and are not guarantees of future events or performance,
which may be affected by known and unknown risks, trends and
uncertainties. Should one or more of these risks or uncertainties
materialize, or should our assumptions prove incorrect, actual results
may vary materially from those anticipated, projected or implied.
Factors that may cause such a variance include, among others: the
inability to fully realize the anticipated benefits from the
acquisition of Saucony; the challenges of achieving the expected
synergies with Saucony; the possibility of incurring costs or
difficulties related to the integration of the businesses of Stride
Rite and Saucony; the possible failure to retain the Tommy Hilfiger
footwear license; the opening of new stores may be delayed; the volume
of anticipated sales may decline; revenues from new product lines may
fall below expectations; the launch of new product lines may be
delayed; new retail concepts may not achieve expected results; general
retail sales trends may be below expectations; current license
agreements may be terminated; consumer fashion trends may shift to
footwear styling not currently included in our product lines; our
retail customers, including large department stores, may continue to
consolidate or restructure operations resulting in unexpected store
closings; and additional factors discussed from time to time in our
filings with the Securities and Exchange Commission. We expressly
disclaim any responsibility to update forward-looking statements.

   NON-GAAP PRO FORMA FINANCIAL MEASURES:

   This release contains certain non-GAAP financial measures. In
particular, Stride Rite provides historic and future anticipated net
income and diluted earnings per share excluding certain cash and
non-cash charges, which are non-GAAP financial measures. These results
are included as a complement to results provided in accordance with
GAAP because management believes these non-GAAP financial measures
help indicate underlying trends in Stride Rite's business and provide
useful information to both management and investors by excluding
certain items that are not indicative of Stride Rite's core operating
results. These measures should be considered in addition to results
prepared in accordance with GAAP, but should not be considered a
substitute for or superior to GAAP results. The non-GAAP information
provided by Stride Rite may be different from the non-GAAP information
provided by other companies.

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                      The Stride Rite Corporation
                   Summarized Financial Information
         for the periods ended March 3, 2006 and March 4, 2005

                         Statements of Income

(in thousands)                                   First Quarter
                                          ----------------------------

                                                2006           2005
                                          -------------   ------------
                                                    (Unaudited)
 Net sales                                    $183,416       $150,591
 Cost of sales                                 110,184         90,059
                                          -------------   ------------
 Gross profit                                   73,232         60,532
 Selling and administrative expenses            58,910         47,451
                                          -------------   ------------
 Operating income                               14,322         13,081
 Other income (expense), net                      (823)           162
                                          -------------   ------------
 Income before income taxes                     13,499         13,243
 Provision for income taxes                      5,214          5,082
                                          -------------   ------------
 Net income                                     $8,285         $8,161
                                          =============   ============

Earnings per share:
    Diluted                                      $0.22          $0.22
    Basic                                        $0.23          $0.23

Weighted average shares outstanding:
    Diluted                                     37,703         36,963
    Basic                                       36,588         36,007


                            Balance Sheets

                                               2006           2005
                                          -------------   ------------
Assets:                                             (Unaudited)
Cash and cash equivalents                      $23,219        $24,222
Marketable securities                                -         20,400
Accounts receivable                            121,098         90,257
Inventories                                    115,594         94,785
Deferred income taxes                           14,262         12,816
Other current assets                            18,074         13,368
                                          -------------   ------------
     Total current assets                      292,247        255,848
Property and equipment, net                     51,625         52,708
Goodwill                                        56,732            908
Trademarks                                      58,590          1,690
Other assets                                    19,301         11,197
                                          -------------   ------------
     Total assets                             $478,495       $322,351
                                          =============   ============
Liabilities and Stockholders' Equity:
Current liabilities                             67,765         57,930
Long-term debt                                  95,000              -
Deferred income taxes and other
 liabilities                                    38,933         11,647
Stockholders' equity                           276,797        252,774
                                          -------------   ------------
     Total liabilities and stockholders'
      equity                                  $478,495       $322,351
                                          =============   ============



                      The Stride Rite Corporation
                  Reconciliation of Non-GAAP Measures
   Unaudited Non-GAAP Pro Forma Statements of Income (in thousands)

                  For the Quarter Ended March 3, 2006

                                     Reported                Pro forma
                                      First                    First
                                     Quarter   Pro forma      Quarter
                                      2006    Adjustments      2006
                                   ---------- ------------  ----------
  Net sales                         $183,416                 $183,416
  Cost of sales                      110,184     ($2,622)(a)  107,562
                                   ---------- ------------  ----------
  Gross profit                        73,232       2,622       75,854
  Selling and administrative
   expenses                           58,910      (1,163)(b)   57,747
                                   ---------- ------------  ----------
  Operating income                    14,322       3,785       18,107
  Other income (expense), net           (823)                    (823)
                                   ---------- ------------  ----------
  Income before income taxes          13,499       3,785       17,284
  Provision for income taxes           5,214       1,461 (c)    6,675
                                   ---------- ------------  ----------
  Net income                          $8,285      $2,324      $10,609
                                   ========== ============  ==========
 Non-GAAP earnings per share:
     Diluted                           $0.22                    $0.28
     Basic                             $0.23                    $0.29
 Weighted average shares
  outstanding:
     Diluted                          37,703                   37,703
     Basic                            36,588                   36,588


 Pro forma adjustments:

(a) Flow through of the inventory write up to fair value (pre-tax)
(b) Saucony integration costs (pre-tax)
(c) Income tax effect at GAAP rate
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