Earnings Releases

Brown Shoe Reports 2nd Quarter Results; Quantifies Expected Gains from Project IMPACT

ST. LOUIS, MO, August 21, 2001 - Brown Shoe Company, Inc. (NYSE: BWS) reported net earnings of $5,795,000 or $0.33 per diluted share for the second fiscal quarter ended August 4, in line with the company's previously announced expectations, but below year-ago earnings of $0.51.

Consolidated net sales for the second quarter of 2001 were $442,079,000 compared to $419,147,000 in last year's second quarter, an increase of 5.5 percent.

For the six months ended August 4, the company's diluted earnings per share were $0.69 per share, compared with $0.87 per share in 2000. Net earnings were $12,206,000, versus $15,746,000 a year ago. Sales increased 7.9% during the six months to $878,217,000 compared with $813,904,000 last year.

"As one of the country's largest shoe retailers, our retailing businesses have not been able to avoid the industry-wide slowdown in traffic and increase in promotional pressures," noted Brown Shoe Chairman and CEO Ron Fromm. "While operating earnings for our wholesale business were up 148 percent versus second quarter last year, merchandise margin and comparable store sales declines in our retail division more than offset this increase.

"Clearly, our wholesale business, led by a 38 percent sales increase in Naturalizer for the quarter, is delivering great shoes and is out-selling the competition during this slow retail period," Fromm said. "Our efforts to revitalize that business over the last two years have proven very successful. We can now focus on implementing our next round of operating enhancements to Brown Shoe Company."

Second Quarter Retail Results
As previously reported, total sales at Famous Footwear, the company's 907-store family footwear chain, rose to $266,433,000 for the quarter, from $254,072,000 for the same 13-week period last year. Same-store sales for the period were down 5.5 percent. The chain experienced an operating loss of $262,000 versus year-ago operating earnings of $13,482,000. This dramatic reduction in operating profitability was due to several factors including a slowdown in consumer traffic levels and corresponding declines in comparable store sales, as well as an appropriately aggressive inventory clearance program, which resulted in sharply lower margins. The company continues to believe that it is merchandised well for the current back-to-school season, and is positioned to capitalize on any increase in consumer demand.

Naturalizer Retail, the company's 472-store chain selling the Naturalizer brand of women's shoes in both the U.S. and Canada, posted second quarter sales of $54,567,000 compared to $55,054,000 for the same period last year. Same store sales declined 2.1 percent during the quarter for the 318 U.S.-based stores and increased 3.4 percent for the 154 Canadian stores. Operating earnings for the quarter were $1,530,000 compared to $1,711,000 a year-ago. The decrease is attributable to a lower margin rate and increased marketing expenses.

Second Quarter Wholesale Results
Wholesale sales for the quarter were $120,889,000 versus $110,021,000 last year, led by Naturalizer, which scored a 38 percent increase in sales. Operating earnings for the wholesale businesses, which include branded, private label and licensed footwear for women, men and children sold in the U.S., Canada and several international markets, grew by 148 percent to $13,658,000 from $5,507,000 for the prior-year quarter. The dramatic increase in operating earnings reflects economies of scale gained by increased sales of Naturalizer, as well as gains in women's private label and licensed footwear, and children's footwear. Season to date, Naturalizer has had three shoes in the top 12-selling department store women's patterns, and its Misty dress slide ranks as the number one women's dress shoe in the department store channel.

Inventory at the end of the second quarter was up by 11 percent versus this same time last year, due to the addition of new and larger stores at Famous Footwear and a build up of Naturalizer product in line with the on-order position. Compared to last year, retail square footage at Famous Footwear increased 14 percent.

As previously announced, Brown Shoe is moving forward with enterprise-wide initiatives to improve its inventory management and logistics processes. Its program is called Project IMPACT (Improved Performance and Competitive Transformation).

"We are implementing plans to re-engineer many aspects of our supply chain," said Fromm. "Specifically, we've focused on improving inventory management processes and optimizing our logistics network. We believe these moves, on a comparative business level, will result in a $60 million reduction in inventory by 2004 and add new efficiencies to our distribution system. In 2002, the company should realize an annual pre-tax savings of $4 million, which we expect to grow to as much as $16 million per year by 2004."

The new inventory management processes are designed to improve the way Famous Footwear orders and buys shoes, allocates and meters product flow to stores, and speed the process whereby non-performing product is identified, marked-down and cleared from the system. Expected benefits include increased sales, an overall reduction in inventory levels leading to improved return on investment, reduced markdown exposure, and a fresher product mix as a result of an accelerated exit program.

"Our goal is to drive sales with fresher, more compelling product and significantly reduce our inventory -- thereby reducing our carrying costs," Fromm said. "Pilot tests demonstrated that sales actually improved in stores with up to 20 percent less inventory -- because the "highest-demand" shoes were more visible to the consumer, and as a result, the entire store was both energized and easier to shop."

The inventory initiative also enables the company to further improve its logistics program, increasing the use of "prepacks," shoe orders that are packed and ticketed for final destination at the factory to reduce transportation and material handling costs.

"An analysis of our logistics network confirmed the opportunity for a facility on the West Coast affording increased use of factory pre-pack efficiencies," Fromm said. "The implementation of this program will both save us money and speed our shipment time to our retail partners and West Coast stores."
Brown Shoe also announced that it was undertaking a new round of initiatives under its Project IMPACT. These would include developing a shared services platform, which would provide improved efficiencies and eliminate administrative redundancy. Analyses of the implications and saving opportunities are underway and estimates will be finalized later this year. These estimates will be incremental to the initial Project IMPACT savings announced today.

With respect to forward-looking guidance, the company estimates an earnings range of $0.65 to $0.70 for the third quarter, and has narrowed its range for full year earnings to $1.65 to $1.70.

Second Quarter Earnings and Conference Call
Brown Shoe will hold a conference call to discuss these results 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.streetevents.com. At the website, click on the Individual Investor Center to locate the broadcast. To listen to the webcast, your computer must have RealPlayer installed. If you do not have RealPlayer, go to http://www.streetevents.com prior to the call, where you can download RealPlayer for free.


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. Brown Shoe Company, Inc. reports to the Securities and Exchange Commission including its Annual Report on Form 10-K contain detailed information relating to such factors.

Brown Shoe is a $1.7 billion footwear company with worldwide operations. The company operates the Famous Footwear and Naturalizer chains of footwear retail stores and markets leading brands including Naturalizer, LifeStride, Buster Brown, and licensed brands including Dr. Scholl's, Barbie, and other kids' character footwear. Brown Shoe press releases are available through PR Newswire's Company News On-Call service at http://www.prnewswire.com/gh/cnoc/comp/109435.html.

(Thousands, except per share)
	Thirteen Weeks Ended		Twenty-six Weeks Ended
	August 4, 2001	July 29,2000	August 4, 2001	July 29,2000
Net Sales	$442,079	$419,147	$ 878,217	$ 813,904
Cost of Goods Sold	272,535	251,056	533,625	483,839
Gross Profit	169,544	168,091	344,592	330,065
Selling and Administrative Expenses	158,504	150,392	318,553	298,335
Interest Expense	5,247	4,314	10,764	8,579
Other (Income)	(2,032)	(333)	(1,977)	(507)
Earnings Before Income Taxes	7,825	13,718	17,252	23,658
Income Tax Provision	2,030	4,520	5,046	7,912
Net Earnings	$ 5,795	$ 9,198	$ 12,206	$ 15,746
Basic Net Earnings per Common Share	$ .34	$ .51	$ .71	$ .88
Diluted Net Earnings per Common Share	$ .33	$ .51	$ .69	$ .87
Basic Number of Shares	17,812	17,863	17,164	17,891
Diluted Number of Shares	17,626	18,057	17,636	18,058

(Thousands)

	August 4, 2001	July 29, 2000
ASSETS
Cash and Cash Equivalents	$47,126	$31,945
Receivables, Net	63,760	60,832
Inventories, Net	496,951	447,817
Other Current Assets	24,405	22,572
Total Current Assets	632,242	563.166
Property & Equipment - Net	89,339	87,790
Other Assets	87,814	77,119
	$ 809,395	$ 728,075
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes Payable	$ 68,000	$ 14,000
Trade Accounts Payable	200,801	170,303
Accrued Expenses	77,150	85,750
Income Taxes	3,574	6,500
Current Maturities of Long-Term Debt	28,550	10,000
Total Current Liabilities	378,075	286,553
Long-Term Debt and Capitalized Leases	133,489	162,035
Other Liabilities	20,278	19,657
Shareholders' Equity	277,553	259,830
	$ 809,395	$ 728,075