The Stride Rite Corporation reported that sales for the fourth quarter of fiscal 2004 increased 13% to $116.8 million from $103.8 million in the comparable period of fiscal 2003. Net income for the fourth quarter totaled $51 thousand or zero per diluted share, as compared to a net loss of $965 thousand or a net loss of two cents per diluted share in last year’s fourth quarter. The fourth quarter of fiscal 2004 contained 14 weeks compared to the 13 weeks in the fourth quarter of 2003.

For fiscal year 2004 net sales were $558.3 million, an increase of 1% from the net sales of $550.1 million for fiscal year 2003. Fully diluted earnings per share were $.66 for fiscal 2004 versus $.64 in fiscal 2003. Net income for fiscal year 2004 totaled $25.7 million, an increase of 1% from the $25.5 million reported in the 2003 fiscal year. The 2004 fiscal year contained 53 weeks compared to 52 weeks in fiscal year 2003.

Fourth quarter and full fiscal year sales of the Stride Rite Children’s Group increased 17% and 7%, respectively, compared to the same periods in fiscal 2003. The Children’s Group company-owned retail stores recorded a sales increase of 23% for the fourth quarter over the same period of fiscal 2003 and 12% over the prior year. As noted earlier, performance was helped by the fact that fiscal 2004 was a 53 week year. Comparable Children’s Group retail stores sales increased from the similar periods of last year, 8.2% and 6.9% for the fourth quarter and full year, respectively. Sales by the Children’s Group to independent retailers increased 5% during the fourth quarter of fiscal 2004 as compared to last year and were flat for the year.

At the end of fiscal 2004, the Stride Rite Children’s Group operated 251 stores, an increase of 8% from the prior year.

Sales of Sperry Top-Sider footwear increased 40% in the fourth quarter and 10% versus the full fiscal 2003 year.

Sales of Keds increased 4% versus the fourth quarter of last year, although annual Keds sales decreased 11% versus last year.

Tommy Hilfiger sales decreased 6% in the fourth quarter and 3% for the full year compared to the same periods in fiscal 2003.

International sales for the fourth quarter increased 14% and 16% for the full year versus the same periods in 2003.

The Company’s gross profit percentage of 38.4% in the fourth quarter of fiscal 2004 increased 1.9 percentage points as compared to the same period last year. For the full year, gross margin at 38.1% was equal to fiscal 2003. Operating expenses in the fourth quarter increased 11% and 1% for the full year of 2004 compared to the prior year.

The year-end balance sheet remains strong. The Company’s cash balance of $91 million was $12 million lower than the year-end cash balance of 2003. The Company repurchased 1,052,606 shares of Company stock at a cost of approximately $11 million dollars in the fourth quarter. During fiscal 2004, the Company repurchased approximately 4 million shares of Company stock at a cost of $42.2 million dollars. Accounts receivable decreased 7% compared to last year on a 13% increase in sales during the fourth quarter. DSO decreased to 37 days, three days below 2003, factoring in the additional week in fiscal 2004. Inventories of $88 million were up 7% compared to the same period of 2003. The Company has no outstanding debt.

David M. Chamberlain, Stride Rite’s Chairman and Chief Executive Officer, commented, “We were very pleased with our fourth quarter sales growth and solid finish to the year. Our Stride Rite Children’s Group had an excellent year with our retail store results continuing to outperform the industry benchmarks. The Sperry Top-Sider division had an outstanding quarter and year. With the preppy trend in the marketplace, we expect Sperry to have another growth year. Our Keds division had improved fourth quarter results due to higher women’s product sales compared to last year. The Keds brand repositioning begins in spring 2005 with Mischa Barton as the Keds spokesperson. The Tommy Hilfiger sales were impacted in the quarter by lower men’s and closeout product sales. International continues to enjoy solid performance. We have made good progress in building our brands and product lines in 2004. We look forward to a year of growth in 2005.”

Mr. Chamberlain continued, “In looking ahead, we expect the positive momentum of the Stride Rite Children’s Group, Sperry and International to continue into 2005. We anticipate the repositioning and turnaround for Keds will provide the foundation for growth in 2006. Assuming reasonable market and economic conditions in 2005, we are projecting our sales will grow 3 to 5% and our earnings will grow 5 to 10%.”

                          (in thousands, except per share amounts)

                            For the Quarter          For the Year
                                 Ended                  Ended
                        ----------------------- ----------------------
                            Dec 3,      Nov 28,    Dec 3,     Nov 28,
                             2004        2003       2004        2003
                        ------------  --------- ----------- ----------
Net sales                  $116,799   $103,769    $558,324   $550,124
Net income (loss)                51       (965)     25,654     25,488
Net income (loss) per common share:
 Diluted                        .00       (.02)        .66        .64
 Basic                          .00       (.02)        .68        .65