Stride Rite Reports Increased Third Quarter Sales and Strong Earnings

The Stride Rite Corporation (NYSE: SRR) today reported
financial results for its 2005 third fiscal quarter and nine months
ended September 2, 2005.
   Third quarter net sales in fiscal 2005 were $146.2 million, an
increase of 4% from the net sales of $140.4 million in the comparable
period of fiscal 2004. Operating income in the third quarter of 2005
was $11.1 million, an 18% increase from the prior year's quarter. Net
income for the third quarter totaled $7.7 million or $.21 per diluted
share, an increase of 24% compared to the net income of $6.2 million
or $.16 per diluted share in the third quarter of 2004.
   For the first nine months of fiscal 2005, net sales were $456.5
million, an increase of 3% from the net sales of $441.5 million for
the same period in fiscal 2004. Fully diluted earnings per share were
$.74 for the first nine months of fiscal 2005 versus $.65 in fiscal
2004. Net income for the first nine months of fiscal 2005 totaled
$27.6 million, an increase of 8% from the $25.6 million reported in
the comparable period in 2004.
   Third quarter sales of the Stride Rite Children's Group increased
9% compared to the third quarter of fiscal 2004. The Children's Group
company-owned retail stores recorded a sales increase of 20% for the
third quarter over the same period of fiscal 2004. Sales at comparable
Children's Group retail stores increased 7.4% in the third quarter
versus last year. Year-to-date comparable retail store sales are now
up 5.5% through the first nine months of 2005. Sales by the Children's
Group to independent retailers decreased 6% during the third quarter
of fiscal 2005 as compared to the same period last year. At the end of
the third quarter of fiscal 2005, the Stride Rite Children's Group
operated 264 stores, an increase of 9% from the prior year. Sales of
Sperry Top-Sider footwear increased 53% in the third quarter of fiscal
2005 versus the same period of fiscal 2004. Sales of Keds and Tommy
Hilfiger products decreased 9% and 27%, respectively, in the third
quarter of fiscal 2005 from the prior year's comparable period.
International sales for the third quarter increased 33% versus the
same period in 2004.
   The Company's gross profit percentage of 39.8% in the third
quarter of fiscal 2005 increased 3.3 percentage points as compared to
the same period last year. Keds, Stride Rite Children's Group and
Sperry Top-Sider all had strong gross profit percentage improvements
versus last year. Operating expenses in the third quarter of 2005
increased 13%, as compared to the same period last year. As planned,
the major operating cost increases for the period related to higher
advertising costs and the Stride Rite Children's Group retail store
expansion. Excluding those costs, operating expenses increased 3%
versus last year.
   The quarter end balance sheet was strong. Accounts receivable was
increased 1% compared to last year on a 4% quarterly sales increase.
DSO was 40 days, a decrease of 3 days versus the same period last
year. Inventories of $86 million were up 7% compared to the same
period of 2004. Net cash and marketable securities were $92 million
and the Company had no outstanding debt at the end of the third
quarter.
   David M. Chamberlain, Chairman and Chief Executive Officer,
commented, "The third quarter was a nice reflection of the strength of
our brands and product offerings, even as we work through the Keds
repositioning. Children's Group store comps increased 7.4%, reflecting
the strength of our retail strategy and our key product lines. The
Children's Group wholesale business was impacted by declines in Tommy
Hilfiger and Munchkin. We continue our strategy of opening additional
doors and expect to have a net increase of 21 stores this year, up 8%
from a year ago. Keds continues its transition to an active, upscale
lifestyle brand. Their sales were down 9% for the quarter reflecting
significantly fewer sales to the value channel and closeout retailers,
reduced sales in the mid-tier channel and increased sales in premium
department and specialty stores. We also continued the advertising
campaign featuring Mischa Barton of "The O.C." into the fall season as
part of our effort to attract younger customers."
   "Sperry Top-Sider sales increased 53% for the quarter and are up
31% for the nine months. The quarter increase reflected growth in
men's, women's and the outdoor and marine channels. Tommy sales,
excluding PRO-Keds, which is now licensed, and the discontinued Tommy
H line, were down 20% for the quarter. The decline was primarily in
men's. International sales are up 33% for the quarter and 25% for the
nine month period."
   Mr. Chamberlain continued, "As previously announced, we completed
the Saucony acquisition on September 16, 2005 and are moving ahead
quickly to implement our integration plans. Saucony expands Stride
Rite's portfolio of nationally recognized footwear brands, and has
excellent long-term growth potential. We expect the Saucony
acquisition to be accretive to earnings starting in 2006 before any
non-cash purchase accounting inventory impact. In the fourth quarter
of 2005, the acquisition is expected to be dilutive to earnings by
approximately $.04 per share before the non-cash purchase accounting
inventory impact."
   A summary of sales and net income for the third quarter
(unaudited) is provided below. A more detailed balance sheet and
income statement follows this release.

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                              (in thousands, except per share amounts)
                                   For the Quarter    For the Nine
                                        Ended          Months Ended
                                  ----------------- ------------------
                                 September   August September August
                                        2,      27,       2,     27,
                                      2005     2004     2005    2004
                                  ------------------------------------
Net sales                         $146,237 $140,382 $456,469 $441,525
Net income                           7,715    6,219   27,628   25,603
Net income per common share:
   Diluted                             .21      .16      .74      .65
   Basic                               .21      .17      .76      .66
Average common shares used in per
 share  computations:
 Diluted                            37,396   38,159   37,188   39,311
 Basic                              36,292   37,467   36,158   38,508
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   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, Spotbilt and Hind. Apparel products
are marketed by the Company under the Hind brand name. Information
about the Company is available on our website -
www.strideritecorp.com. The Company will provide a live webcast of its
third 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 September 27,
2005. An on-line replay will follow shortly after the call and will
continue through October 4, 2005. 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 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 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.

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                      The Stride Rite Corporation
                   Summarized Financial Information
      for the periods ended September 2, 2005 and August 27, 2004

                       Statements of Income

   (in thousands)  
                                Third Quarter         Nine Months
                                -------------     --------------------
                                  2005      2004       2005      2004
                             ---------- --------- ---------- ---------
                                 (Unaudited)          (Unaudited)
    Net sales                 $146,237  $140,382   $456,469  $441,525
    Cost of sales               88,047    89,197    272,536   273,825
                             ---------- --------- ---------- ---------
    Gross profit                58,190    51,185    183,933   167,700
    Selling and
     administrative expenses    47,136    41,831    141,615   127,760
                             ---------- --------- ---------- ---------
    Operating income            11,054     9,354     42,318    39,940
    Other income, net              695       134      1,065       874
                             ---------- --------- ---------- ---------
    Income before income
     taxes                      11,749     9,488     43,383    40,814
    Provision for income
     taxes                       4,034     3,269     15,755    15,211
                             ---------- --------- ---------- ---------
    Net income                  $7,715    $6,219    $27,628   $25,603
                             ========== ========= ========== =========



                                       Balance Sheets
                                                  2005        2004
                                            ----------- -----------
   Assets:                                         (Unaudited)
   Cash and cash equivalents                   $92,281     $19,056
   Marketable securities                             -      65,850
   Accounts receivable                          70,440      69,998
   Inventories                                  86,171      80,604
   Deferred income taxes                        16,363      15,167
   Other current assets                         10,383      10,140
                                            ----------- -----------
        Total current assets                   275,638     260,815
   Property and equipment, net                  50,964      56,874
   Other assets                                 14,039      12,582
                                            ----------- -----------
        Total assets                          $340,641    $330,271
                                            =========== ===========
   Liabilities and Stockholders' Equity:
   Current liabilities                          55,531      55,902
   Deferred income taxes and other
    liabilities                                 16,486      13,989
   Stockholders' equity                        268,624     260,380
                                            ----------- -----------
        Total liabilities and stockholders'
         equity                               $340,641    $330,271
                                            =========== ===========
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