CORRECTING and REPLACING Maxwell Shoe Company Announces Second Quarter and Six Months Financial Results; Operating Income Rises 58.2% to $10.4 million

Business Wire, May 20, 2004

Business Editors

CORRECTION...by Maxwell Shoe Company Inc.

HYDE PARK, Mass.--(BUSINESS WIRE)--May 20, 2004

In BW5099 issued May 20, 2004: In first table (Statements of Income), Interest income, net under Three Months Ended April 30, 2004 should read: (274) sted (2)

The corrected release reads:

MAXWELL SHOE COMPANY ANNOUNCES SECOND QUARTER AND SIX MONTHS FINANCIAL RESULTS; OPERATING INCOME RISES 58.2% TO $10.4 MILLION

Company Again Raises Fiscal 2004 Sales and Earnings Guidance

Maxwell Shoe Company Inc., (NASDAQ: MAXS), today announced financial results for the second fiscal quarter and six months ended April 30, 2004.

In the second quarter:

-- Net sales increased 27.6% to $73.7 million compared to $57.8

million in 2003;

-- Operating income rose 58.2% to $10.4 million, or 14.1% of net

sales compared to $6.6 million, or 11.4% of net sales, in

2003;

-- Order backlog increased 18.8% to $106.7 million compared to

$89.8 million in 2003;

-- Net income grew 8.3% to $4.5 million, or 6.0% of net sales,

versus $4.1 million, or 7.1% of net sales, in 2003;

-- Diluted earnings per share increased 4.2% to $0.28 compared to

$0.27 in 2003; and

-- Excluding costs related to Jones Apparel Group, Inc.'s

("Jones") (NYSE: JNY) unsolicited tender offer, diluted

earnings per share rose more than 51% to $0.41 compared to

$0.27 in 2003.

For the six months ended April 30, 2004:

-- Net sales rose by 23.0% to $127.4 million compared to $103.5

million in 2003;

-- Operating income increased by 52.0% to $15.6 million, or 12.2%

of net sales compared to $10.3 million, or 9.9% of net sales,

in 2003;

-- Net income grew by 18.2% to $7.7 million, or 6.1% of net sales

compared to $6.5 million, or 6.3% of net sales, in 2003;

-- Diluted earnings per share increased by 14.1% to $0.49

compared to $0.43 in 2003; and

-- Excluding costs related to Jones's unsolicited tender offer,

diluted earnings per share rose over 44% to $0.62 compared to

$0.43 in 2003.

"We are extremely pleased with the results we reported today," stated Mark Cocozza, Chairman and Chief Executive Officer. "The second quarter marked the highest net sales quarter in our Company's history with net sales growth of 27.6% to $73.7 million, compared to $57.8 million in the second quarter of 2003. Operating income rose by approximately 58%, increasing faster than net sales, thus providing a true indication of our superior execution skills and efficient and disciplined approach to our business. With the second quarter, we also delivered our 18th consecutive quarter whereby we have met or exceeded expectations, which were given prior to costs related to the Jones tender offer.

"We attribute our ability to report sustained positive operating momentum to the ongoing success of our business model, which we have built over the past 20 years," Mr. Cocozza continued. "To this point, during the quarter, the platform we have created allowed us to successfully capitalize on the trend toward feminine contemporary styled footwear - a core competency of ours. We accomplished this with five compelling brands, which have become favorites of consumers in their respective market segments. This contributed to the strong results we reported today and positions us well in the current year and beyond."

Gross profit dollars in the second quarter rose by 21.7% to $19.8 million, or 26.9% of net sales, compared to $16.3 million, or 28.2% of net sales, in the second quarter of 2003. A higher mix of private label sales versus the second fiscal quarter last year impacted gross profit margin.

Operating expenses totaled $9.4 million, or 12.8% of net sales compared to $9.7 million, or 16.8% of net sales, in the second quarter of 2003. Gains in efficiency and disciplined expense management strategies enabled the Company to record a 400 basis point improvement in operating expenses as a percent of net sales. As a result, operating income increased by 58.2% to $10.4 million, or 14.1% of net sales, compared to $6.6 million, or 11.4% of net sales, in the prior year's second fiscal quarter.

For the six months ended April 30, 2004, gross profit dollars rose by 18.9% to $34.1 million, or 26.8% of net sales, compared to $28.7 million, or 27.7% of sales, in the first six months of fiscal 2003. Operating expenses totaled $18.6 million and improved by 320 basis points to 14.6% of net sales from $18.5 million, or 17.8% of net sales, in the first six months of the prior fiscal year. Operating income reached $15.6 million, or 12.2% of net sales, increasing 52.0% from $10.3 million, or 9.9% of net sales in the first six months of fiscal 2003.

The Company's balance sheet continued to strengthen. At quarter end, cash totaled $105.0 million, rising $25.5 million from $79.5 million at April 30, 2003. Inventory and accounts receivable were on plan and current. Inventory totaled $16.3 million, representing a 6.6% decline from $17.4 million at April 30, 2003. Accounts receivable totaled $43.1 million, increasing 5.5%, as compared to $40.9 million at April 30, 2003 and well below the rate of sales growth. In addition, working capital increased by $19.5 million to $152.0 million from $132.5 million at April 30, 2003.