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While many other retailers are suffering from consumer cutbacks, Bakers Footwear Group Inc. isn’t exactly well-heeled but is stepping in the right direction.

The St. Louis-based chain narrowed its third-quarter losses and raised its comparable store sales thanks to young women shoppers who paid full price for lower ticket, fashionable dress shoes and boots.

Comparable store sales, a key measurement of a retailer’s performance, rose 4.5 percent versus a decline of 16.6 percent in the year ago. Comparable sales are generated by stores open at least one year.

Bakers’ results are striking compared to other chains, which are seeing comparable sales drop as consumers cut back on discretionary spending. For example, Clayton-based Brown Shoe Co. reported last month that its Famous Footwear chain saw comparable sales decrease by 5 percent in the third quarter, compared to a decrease of 2.6 percent a year ago.

Bakers’ third quarter results are also significant because the company appeared to be in serious trouble as recently as this past spring. In June it faced possible delisting by the Nasdaq Stock Market for failing to maintain a minimum market value of $5 million in publicly held shares. One month earlier, Baker’s independent auditor, Ernst & Young, issued a report raising "substantial doubt" about the viability of the company. The auditor cited as trouble spots operating losses in recent years and certain restrictions on the company’s debt.

In August, Bakers regained Nasdaq compliance and the next month it reported second quarter losses had begun to shrink and comparable store figures were rising.

"It’s definitely a turnaround," Peter Edison, chairman and chief executive, said in an interview.

Steps the chain started taking more than a year ago to slash inventory, halt store growth and reduce price points are beginning to pay off, he said. In addition, the tough economy has brought Bakers new shoppers who are trading down from more expensive footwear low cost car insurance.

The chain’s core customers, women 18 to 25, are at an age when they like to go out and won’t be deterred by a recession, he said. Bakers saw a similar trend in the 1970s when it performed well during a challenging economy.

"We had a fabulous decade because of the disco era with disco dress shoes and boots," Edison said. "Fashion trumps the economy."

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But the company is not out of the woods. A filing with the Securities and Exchange Commission on Tuesday states that Bakers’ losses this year and last have had a "significant negative impact" on its financial position and liquidity. As of Nov. 1, it had negative working capital of $17 million, unused borrowing capacity of $1.4 million and shareholders’ equity had declined $9.8 million.

While it still faces considerable liquidity constraints, Bakers says it believes it has adequate money to fund anticipated working capital requirements and expects to be in compliance with its financial covenants throughout the remainder of the year.

"However," the filing said, "given the inherent volatility in the company’s sales performance, there is no assurance that it will be able to do so."

gappleson@post-dispatch.com

314-340-8331

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