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                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q
(Mark One)

(X)   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                   For the quarterly period ended June 2, 2006

( )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                       For the transition period from to .

                         Commission File Number: 1-4404

                           THE STRIDE RITE CORPORATION
                   (Exact name of registrant as specified in its charter)

        Massachusetts                                 04-1399290
   ----------------------------                  ---------------------
   (State or other jurisdiction                (I.R.S. Employer Identified No.)
    of Incorporation or Organization)

                191 Spring Street, Lexington, Massachusetts 02421
              (Address of principal executive offices) (Zip Code)

                              (617)824-6000
                  ------------------------------------------
              (Registrant's telephone number, including area code)


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

          Yes (X)          No ( )

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and larger  accelerated  filer" in Rule 12b-2 of the Exchange Act.  (Check
One):

Large accelerated filer ( ) Accelerated filer (X) Non-accelerated filer ( )

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act).

          Yes( )          No (X)

     As of July 5, 2006,  36,436,444  shares of the  Registrant's  common stock,
$.25 par value,  and the  accompanying  Preferred  Stock  Purchase  Rights  were
outstanding.


<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements

                           THE STRIDE RITE CORPORATION
<TABLE>
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)


<CAPTION>
                                     June 2,                           June 3,
                                       2006          December 2,        2005
                                   (Unaudited)          2005         (Unaudited)
                                  ---------------   --------------  ------------

  Assets

  Current Assets:
     Cash and cash
<S>                                    <C>              <C>             <C>
      equivalents                      $23,349          $33,094         $30,376

     Marketable securities                   -                -          40,000

     Accounts and notes
       receivable, net                  96,102           63,368          73,079

     Inventories                       123,108          116,095          98,476

     Deferred income taxes              13,620           14,211          15,134

     Other current assets               15,741           25,918           7,050
                                      --------         --------         -------

     Total current assets              271,920          252,686         264,115

  Property and equipment, net           52,373           51,367          51,758

  Goodwill                              56,794           56,729             908

  Trademarks and other
    intangibles                         58,590           58,590           1,690

  Other assets, net                     18,736           19,482          10,506
                                      --------         --------        --------

     Total assets                     $458,413         $438,854        $328,977
                                      ========         ========        ========
</TABLE>















               The accompanying notes are an integral part of the
                  condensed consolidated financial statements.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION
<TABLE>
                CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
                      (In thousands, except for share data)

<CAPTION>
                                    June 2,                           June 3,
                                      2006         December 2,         2005
                                  (Unaudited)          2005         (Unaudited)
                                ---------------  --------------   --------------

  Liabilities and Stockholders' Equity

  Current Liabilities:
<S>                                     <C>             <C>        <C>
     Accounts payable                   $32,041         $24,186    $   14,647
     Income taxes payable                     -          12,845        17,378
     Accrued expenses and other
  liabilities                            29,195          35,991        20,884
                                         ------          ------      --------
     Total current liabilities           61,236          73,022        52,909

  Long term debt                         68,000          60,000             -
  Deferred income taxes                  23,472          23,980           487
  Pension obligation and other
       long-term liabilities             16,202          15,174        12,151

  Stockholders' Equity:
     Preferred stock, $1 par value
       Shares authorized - 1,000,000
       Shares issued - None                -                  -             -

     Common stock, $.25 par value
       Share authorized - 135,000,000
       Shares issued and
       outstanding -
        36,420,263 on
        June 2,2006,
        36,499,403 on
        December 2, 2005 and
        36,233,727 on June 3,
        2005                              9,100           9,125         9,058

     Capital in excess of par
        value                            22,417          18,434         9,311

    Retained earnings                   265,395         248,586       254,284
    Accumulated other
        comprehensive loss               (7,409)         (9,467)       (9,223)
                                       ---------       ---------     ---------
     Total stockholders' equity         289,503         266,678       263,430
                                       ---------       ---------     ---------

     Total liabilities and
        stockholders' equity           $458,413        $438,854      $328,977
                                       ========        ========      ========
</TABLE>



               The accompanying notes are an integral part of the
                  condensed consolidated financial statements.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION
<TABLE>
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
             For the six months ended June 2, 2006 and June 3, 2005
                    (In thousands, except for per share data)

                          Three Months Ended             Six Months Ended
                      ---------------------------   ---------------------------
<CAPTION>
                        June 2,        June 3,        June 2,       June 3,
                          2006          2005           2006           2005
                      -------------  ------------   ------------  -------------

<S>                    <C>            <C>            <C>           <C>
Net sales              $194,007       $159,641       $377,423      $310,232

Cost of sales           111,728         94,430        221,912       184,489
                       --------       --------      ---------      --------

Gross profit             82,279         65,211        155,511       125,743

Selling and
 administrative
  expenses               60,291         47,028        119,201        94,479
                       --------       --------      ---------      --------

Operating income         21,988         18,183         36,310        31,264


Investment income           336            380            820           680
Interest expense         (1,347)           (91)        (2,551)         (172)
Other expense, net          (53)           (81)          (156)         (138)
                       ---------      ----------    ----------     ---------
                         (1,064)           208         (1,887)          370

Income before
  income taxes           20,924         18,391         34,423        31,634

Provision for
  income taxes            4,031          6,639          9,245        11,721
                       --------       --------      ---------      --------

Net income              $16,893        $11,752       $ 25,178       $19,913
                       ========       ========      =========      ========

Net income per common share:
   Diluted              $   .45        $   .32       $    .67       $   .54
                       ========       ========      =========      ========
   Basic                $   .46        $   .32       $    .69       $   .55
                       ========       ========      =========      ========

Dividends per
common share            $   .06        $   .06       $    .12       $   .11
                       ========       ========      =========      ========

Average common
  shares used in
  per share
  computations:
   Diluted               37,623         37,185         37,619        37,075
                      =========       ========      =========      ========
   Basic                 36,650         36,175         36,625        36,091
                      =========       ========      =========      ========
</TABLE>



               The accompanying notes are an integral part of the
                  condensed consolidated financial statements.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION
<TABLE>
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
             For the six months ended June 2, 2006 and June 3, 2005
                                 (In thousands)
<CAPTION>
                                                        2006             2005
                                                  --------------   -------------
Cash flows from operating activities:
<S>                                                       <C>          <C>
   Net income                                             $25,178      $19,913
   Adjustments to reconcile net income to net
     cash used  by operating activities:
   Depreciation and amortization                            7,822        6,320
   Deferred income taxes                                       74       (2,011)
   Compensation expense related to stock plans              1,628          360
   Gain related to long-term investments                        -          (61)
   Loss on disposals of property and equipment                592           30
   Changes in:
      Accounts and notes receivable                      (32,181)      (25,470)
      Inventories                                         (6,683)      (10,720)
      Other current assets                                  9,660        7,483
      Other current liabilities                          (10,070)       (5,520)
      Other long-term assets                                  648       (1,233)
      Other long-term liabilities                           1,539           72
   Contribution to pension plan                                 -       (3,000)
                                                         --------      --------
      Net cash used by operating activities               (1,793)      (13,837)
                                                         --------      --------

Cash flows from investing activities:
   Additions to property and equipment                    (9,399)       (3,863)
   Purchase of minority interest in Saucony
     Canada, Inc.                                           (853)            -
   Investments in marketable securities
     available for sale                                        -       (29,325)
   Proceeds from sale of marketable securities
     available for sale                                        -        60,175
   Distributions from long-term investments                    -            61
                                                        ---------      -------
      Net cash (used in) provided from investing
      activities                                         (10,252)       27,048
                                                        ---------      -------

Cash flows from financing activities:
   Borrowings under revolving credit facility             63,000             -
   Payments under revolving credit facility              (55,000)            -
   Proceeds from sale of stock under stock plans           2,943         6,172
   Tax benefit in connection with exercise of
     stock options                                           685             -
   Cash dividends paid                                    (4,398)       (3,598)
   Repurchase of common stock                             (6,338)       (5,758)
                                                        ---------      --------
      Net cash provided from (used in) financing
      activities                                             892        (3,184)
                                                        ---------      --------

Effect of exchange rate changes on cash and
      cash equivalents                                     1,408           344
                                                        ---------      --------

Net (decrease) increase in cash and cash
equivalents                                               (9,745)       10,371

Cash and cash equivalents at beginning of the
  period                                                  33,094        20,005
                                                        --------       --------

Cash and cash equivalents at end of the period           $23,349       $30,376
                                                         =======       =======
</TABLE>

               The accompanying notes are an integral part of the
                  condensed consolidated financial statements.
<PAGE>

PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -   Summary of Significant Accounting Policies

Basis of Presentation

     The  financial  information  included  in this Form 10-Q of The Stride Rite
Corporation  (the "Company") for the periods ended June 2, 2006 and June 3, 2005
is unaudited, however, such information includes all adjustments (including only
and all normal recurring  adjustments) which, in the opinion of management,  are
considered  necessary for a fair  presentation of the  consolidated  results for
those periods.  The results of operations for the periods ended June 2, 2006 and
June 3, 2005 are not  necessarily  indicative of the results of operations  that
may be expected for the complete  fiscal year.  The year-end  condensed  balance
sheet data was derived from audited financial  statements,  but does not include
all  disclosures  required by  generally  accepted  accounting  principles.  The
Company filed with the Securities and Exchange  Commission audited  consolidated
financial  statements  for the year ended  December 2, 2005 on Form 10-K,  which
included all information and footnotes necessary for such presentation.

     Certain  reclassifications  have  been made to the  condensed  consolidated
balance  sheet at June 3, 2005 to conform with current  period and 2005 year end
presentation.

     Effective July 1, 2004, new  capitalization  rules under the  Massachusetts
Business  Corporation  Act,  Chapter 156D provided  that shares  reacquired by a
company  become  authorized but unissued  shares;  effectively  eliminating  the
concept  of  treasury  stock.  The  Company  has  reflected  this  change in the
accompanying consolidated balance sheet for the quarter ended June 3, 2005.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     The  Company's  preparation  of financial  statements  in  conformity  with
accounting   principles   generally  accepted  in  the  United  States  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the dates of the financial  statements and the reported  amounts of revenues and
expenses  during the respective  periods.  The Company's  significant  estimates
included in these financial statements include valuation allowances and reserves
for accounts  receivable;  sales  returns  allowances;  markdowns  (which reduce
revenues); inventory valuation; income taxes; assumptions related to the defined
benefit  pension  plan;  assumptions  used  in the  calculation  of  share-based
compensation  costs;  assumptions  and estimates  used in valuing the assets and
liabilities  acquired  through  business  acquisitions;  and estimates of future
undiscounted  cash flows on property and equipment that may be impaired.  Actual
results could differ materially from those estimates.

Stock Purchase and Option Plans

     During  2002,   the  Company's   stockholders   approved  The  Stride  Rite
Corporation  Amended and Restated  Employee Stock  Purchase  Plan.  Amending the
Employee Stock Purchase Plan, among other things, increased the number of common
shares  available  for  issuance  thereunder  by  500,000  shares  to a total of
6,140,000  shares.  Under the Plan,  participating  associates can authorize the
Company to withhold up to 10% of their  earnings  during  consecutive  six month
payment  periods for the purchase of shares.  At the  conclusion  of the period,
associates  can purchase  shares at the lesser of 85% of the market value of the
Company's  common stock on either their entry date into the Plan or the last day
of the payment  period.  Effective  at the  commencement  of the January 1, 2006
withholding  period,  the Employee  Stock  Purchase Plan ("ESPP")  shortened its
withholding  periods to three months,  increased the purchase  price from 85% of
the  market  value to 95% of the  market  value  and  eliminated  the  look-back
provision to the start of the  withholding  period.  During the first six months
ended June 2, 2006,  a total of 62,435  shares were issued under the Plan for an
aggregate  amount of $765,258.  At June 2, 2006, a total of 5,922,593 shares had
been purchased  under the Plan since inception and 217,407 shares were available
for purchase by participating associates.

     During  1998,   the  Company's   stockholders   approved  The  Stride  Rite
Corporation  1998  Non-Employee  Director Stock Ownership  Plan.  Under the 1998
Director's Plan, awards of common stock and options to purchase common stock are
granted to any director who is not an employee of the Company in accordance with
the  provisions  of the Plan.  During  April 2003,  the  Company's  stockholders
approved an  amendment  to the 1998  Director's  Plan  increasing  the number of
shares of common stock authorized for issuance from 300,000 to 600,000.  Options
to purchase  common  stock are granted at a price equal to the closing  price of
the Company's common stock on the date the option is granted.  Directors receive
an annual  grant of options to purchase  5,000  shares of common stock under the
Plan. Options have a term of ten years and are non-transferable. Under the Plan,
options become exercisable over a three-year period and must be paid for in full
at the time of exercise.  In April 1999, the stockholders  approved an amendment
to the Plan which  allowed  directors to receive  their annual  retainer  either
entirely in shares of common stock or

<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

one-half  in shares  of common  stock and  one-half  in cash at  the election of
each director. In addition, directors may defer receipt of the stock and/or cash
portion of their annual  retainer by electing to  participate  in the  Company's
Deferred  Compensation  Plan for  Directors.  At June 2, 2006,  the  issuance of
127,240 shares has been deferred by  participating  directors.  At June 2, 2006,
138,076 options were available to grant under the 1998 Director's Plan.

     During 2004, the Company's  stockholders  approved an amendment to the 2001
Stock Option and Incentive Plan. This amendment,  among other things,  increased
the number of common shares of stock  reserved and available for issuance  under
the 2001 plan to  6,000,000  shares,  of which  3,000,000  shares  represent  an
increase over the previous number of shares reserved.  The 2001 Stock Option and
Incentive  Plan,  which  expires in April  2011,  replaced  a similar  long-term
incentive plan which had been approved by the  stockholders  in 1998.  Under the
Plan, as amended,  options to purchase common stock and stock awards of up to an
aggregate of 6,000,000  shares of the  Company's  common stock may be granted to
officers  and other key  associates.  At June 2, 2006,  1,679,495  options  were
available  to grant under the 2001 plan.  The option price of the shares may not
be less than the fair market value of the Company's  common stock at the date of
grant.  Options issued under the Plan prior to fiscal 2005 generally vest over a
three-year  period and the rights to  purchase  common  shares  expire ten years
following  the date of grant.  Options  issued  since the  beginning of the 2005
fiscal  year  generally  vest over a  four-year  period and expire  seven  years
following the date of grant. Stock awards, which are limited to 1,000,000 shares
in the Plan, generally vest over a four-year period.

<TABLE>
     A summary of the activity in share based  compensation  with respect to all
plans for the six months ended June 2, 2006 are as follows:

<CAPTION>
                                             Number of
                                            Options and
                                            Restricted          Weighted Average
                                              Shares            Exercise Price
--------------------------------------------------------------------------------
<S>                                          <C>                      <C>
Outstanding at December 2, 2005              3,697,847                $ 8.98
Granted                                        905,596                 11.39
Exercised                                     (288,730)                 6.78
Canceled                                       (44,254)                11.95
                                            -----------               ------
Outstanding at March 3, 2006                 4,270,459                $ 9.60
Granted                                         66,341                 13.48
Exercised                                      (33,260)                 8.96
Canceled                                       (12,600)                11.58
                                            -----------               ------
Outstanding at June 2, 2006                  4,290,940                $ 9.66
                                             =========                ======
</TABLE>




<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
     The following table summarizes  information about stock options outstanding
at June 2, 2006:

<CAPTION>
                                Weighted
                                Average     Weighted
      Range                    Remaining    Average    Aggregate
       of           Number    Contractual   Exercise   Intrinsic
     Prices      Outstanding      Life       Price       Value
     ------      -----------      ----       -----       -----
<C>                 <C>          <C>          <C>     <C>
$5.00-$6.88         1,181,520    4.5 years    $ 5.93  $ 8,128,858
$7.38-$11.00        1,099,726    6.1 years      8.53    4,706,827
$11.01-$12.06       1,127,694    6.4 years     11.58    1,387,064
$12.13-$14.95         882,000    6.6 years     13.63            -
                   ----------    ---------     -----  -----------
                    4,290,940    5.8 years    $ 9.66  $14,222,749
                   ==========    =========    ======  ===========
</TABLE>


<TABLE>
     The following table summarizes  information about stock options exercisable
at June 2, 2006:

<CAPTION>
                                Weighted
                                Average     Weighted
      Range                    Remaining    Average    Aggregate
       of           Number    Contractual   Exercise   Intrinsic
     Prices      Outstanding      Life       Price       Value
     ------      -----------      ----       -----       -----

<C>                 <C>          <C>          <C>     <C>
$5.00-$6.88         1,069,827    4.4 years    $ 6.55  $ 6,697,117
$7.38-$11.00        1,006,612    6.0 years      8.36    4,479,423
$11.01-$12.06         514,917    6.5 years     11.39      731,182
$12.13-$14.95          54,600    3.3 years     12.27       29,484
                   --- ------    ---------    ------  -----------
                    2,645,956    5.4 years    $ 8.30  $11,937,206
                    =========    =========    ======  ===========
</TABLE>


     In December 2004, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123R, "Share-Based Payment" ("SFAS 123R"),
which  requires  all  share-based  payments to  employees,  including  grants of
employee stock options,  to be recognized in the financial  statements  based on
their fair values. SFAS 123R revises SFAS No. 123 and supersedes APB Opinion No.
25, "Accounting for Stock Issued to Employees".  Effective December 3, 2005, the
Company  adopted  the  provisions  of SFAS 123R using the  modified  prospective
application  transition  method.  Under this transition method, the compensation
cost related to all equity  instruments  granted prior to, but not yet vested as
of adoption is recognized  based on the grant-date fair value which is estimated
in  accordance  with the original  provisions of SFAS 123. The  grant-date  fair
value of the awards are generally recognized to expense over the service period.
Under the  provisions  of SFAS  123R,  the  Company  is  required  to include an
estimate of the number of the awards  that will be  forfeited.  Previously,  the
Company had recognized the impact of forfeitures as they occurred.

     Effective at the  commencement of the January 1, 2006  withholding  period,
the changes made to the ESPP  (described  earlier in this footnote)  resulted in
the plan becoming non-compensatory under SFAS No. 123R.



<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     Share-based  compensation costs were $908 thousand and $1.6 million for the
three  and  six  months  ended  June  2,  2006,  respectively.  The  portion  of
share-based  compensation  costs  included in cost of sales in the  accompanying
condensed consolidated  statements of income for the three months and six months
ended  June 2,  2006 was $123  thousand  and $228  thousand,  respectively.  The
portion of share-based compensation costs included in selling and administrative
expenses in the accompanying condensed consolidated statements of income for the
three and six months  ended  June 2, 2006 was $785  thousand  and $1.4  million,
respectively.  The Company did not capitalize any share-based compensation costs
as the costs that qualified for  capitalization  were not material.  The related
tax benefit of the share-based  compensation  costs  recognized in the three and
six months ended June 2, 2006 was $356 thousand and $650 thousand, respectively.

     Prior to  December  3, 2005,  the Company  had  accounted  for  share-based
compensation  costs in accordance  with APB Opinion No. 25, as permitted by SFAS
No. 123. The following  table provides the effect on net income and earnings per
share if the Company had applied the fair value  recognition  provisions of SFAS
No. 123 as amended by SFAS No. 148,  "Accounting for Stock-Based  Compensation -
Transition and Disclosure", through disclosure only for the three and six months
ended June 3, 2005:

<TABLE>
                                Three Months     Six Months
                                   Ended           Ended
                                   -----           -----
<CAPTION>
                                  June 3,        June 3,
                                    2005           2005
                                 -----------    -----------

<S>                               <C>             <C>
Net income, as reported           $11,752         $19,913

Add:  Stock-based employee
compensation expense included
in net income, net of related
tax effects                           164             247

Deduct:  Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects           (645)         (1,142)

Pro forma net income              $11,271         $19,018
                                 ========        ========

Earnings per share:
   Basic - as reported           $    .32         $   .55
                                 ========        ========
   Basic - pro forma             $    .31         $   .53
                                 ========        ========

   Diluted - as reported         $    .32         $   .54
                                 ========        ========
   Diluted - pro forma           $    .30         $   .51
                                 ========        ========
</TABLE>




<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     The  weighted  average  grant date fair value  used in the  calculation  of
share-based  compensation  costs  in  the  accompanying  condensed  consolidated
statements of income for the three and six months ended June 2, 2006 and the pro
forma net income and earnings  per share  information  presented  above has been
calculated  using the  Black-Scholes  option  pricing  model with the  following
weighted average assumptions and the resulting weighted average fair value:

<TABLE>
                                     Three Months Ended       Six Months Ended
                                     ------------------       ----------------
<CAPTION>
                                     June 2,    June 3,      June 2,    June 3,
                                      2006       2005         2006       2005
                                      ----       ----         ----       ----
Employee Stock Options
<S>                                    <C>       <C>           <C>       <C>
Risk-free interest rate                4.85%     3.88%         4.36%     3.47%
Dividend yield                          1.8%      1.9%          1.8%      1.7%
Volatility factor                      30.6%     35.0%         30.6%     35.0%
Weighted average
   expected life of options (years)     5.5       3.5           4.8       4.9
Weighted average grant date fair
    value of options                  $4.71     $3.57         $3.98     $5.00
</TABLE>

     The weighted  average  expected  life of options was  calculated  using the
simplified  method as prescribed  by the  Securities  and Exchange  Commission's
Staff  Accounting  Bulletin  No.  107.  This  decision  was based on the lack of
relevant  historical data due to both decreasing the option's  contractual  term
from 10 years to 7 years and  increasing  the  vesting  period from 3 years to 4
years for options that were granted  starting in fiscal year 2005. The risk-free
interest  rate  assumption  was based on the United States  Treasury's  constant
maturity's  rate for the term of the expected life of the option on the date the
option was granted.  The volatility  assumption  was based on weekly  historical
volatility  during the time period that  corresponds  to the  expected  weighted
average  life of the  option.  The  assumed  dividend  yield  was  based  on the
Company's  expectation of future dividend payouts.  The post-vesting  forfeiture
rate is based on the four year historical  average  turnover rate for two groups
of option eligible  employees.  These assumptions are evaluated,  and revised as
necessary, based on changes in market conditions and historical experience.

     Total  unrecognized  share-based  compensation  costs related to non-vested
stock options was approximately $6.2 million as of June 2, 2006 which related to
approximately  1.8 million shares with a per share weighted value of $3.54. This
unrecognized cost is expected to be recognized over a weighted average period of
approximately 3 years. The intrinsic value of options exercised during the three
and six  months  ended June 2, 2006 was  approximately  $140  thousand  and $1.7
million, respectively.



<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Earnings Per Share

     Basic  earnings  per common  share  excludes  dilution  and is  computed by
dividing net income  available to common  stockholders  by the weighted  average
number of common shares outstanding for the period.  Diluted earnings per common
share  reflects the  potential  dilution  that could occur if stock  options and
other types of stock-based compensation that issue common stock are exercised.

     The  following is a  reconciliation  of the basic and diluted  earnings per
share computations based on the number of shares used in the calculations:

<TABLE>
                                          Three Months            Six Months
                                             Ended                   Ended
                                       -------------------   -------------------

<CAPTION>
                                        June 2,    June 3,    June 2,   June 3,
                                         2006       2005       2006      2005
                                       ---------  --------   --------  --------
                                      (In thousands, except for per share data)
<S>                                     <C>       <C>        <C>        <C>
Net income                              $16,893   $11,752    $25,178    $19,913

Weighted average common shares
outstanding (basic)                      36,650    36,175     36,625     36,091

Dilutive effect of stock options            973     1,010        994        984
                                        -------   -------     ------    -------

Weighted average common shares
  outstanding (diluted)                  37,623    37,185     37,619     37,075
                                         ======    ======     ======     ======

Earnings per common share:
   Basic                                   $.46     $ .32       $.69      $ .55
                                           ====     =====       ====      =====

   Diluted                                 $.45     $ .32       $.67      $ .54
                                           ====     =====       ====      =====
</TABLE>


     The  following  weighted  shares have been excluded in the  computation  of
diluted earnings per share because the weighted shares are anti-dilutive:

<TABLE>
                                          Second Quarter     First Six Months
                                        -------------------  ------------------
<CAPTION>
                                           2006       2005      2006      2005
                                        --------  ---------  --------  --------
                                                    (In thousands)
Options to purchase shares of common
<S>                                       <C>                  <C>          <C>
  stock                                   1,358          -     1,162        26

</TABLE>




<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 - Comprehensive Income

<TABLE>
      Comprehensive income is as follows:
                                        Three Months              Six Months
                                           Ended                    Ended
                                   -----------------------  --------------------
<CAPTION>
                                    June 2,     June 3,      June 2,     June 3,
                                     2006         2005        2006         2005
                                   ----------  -----------  ----------  --------
                                                   (In thousands)
<S>                                <C>         <C>          <C>         <C>
Net income                         $16,893     $11,752      $25,178     $19,913

Other comprehensive
  income(loss):
Foreign currency translation
  adjustments                        1,275        ( 70)       2,058         175
                                   -------     -------      -------     -------

Total comprehensive income         $18,168     $11,682      $27,236     $20,088
                                   =======     =======      =======     =======
</TABLE>


<TABLE>
     Components  of  accumulated  other   comprehensive   loss  consist  of  the
following:

<CAPTION>
                                    June 2,         December 2,        June 3,
                                      2006             2005             2005
                                 ---------------  ----------------  ------------
                                                  (In thousands)
Foreign currency  translation
<S>                                <C>                <C>              <C>
  adjustments                      $ 2,005            $   (53)         $    10
Minimum pension liability
   adjustments, net of taxes        (9,414)            (9,414)          (9,233)
                                   --------           --------        ---------
Accumulated other
   comprehensive loss              $(7,409)           $(9,467)         $(9,223)
                                   ========           ========         ========
</TABLE>


Note 4 - Saucony Acquisition

     In September 2005, the Company  completed its acquisition of Saucony,  Inc.
("Saucony")  pursuant  to an  Agreement  and  Plan  of  Merger.  As  part of the
acquisition  and in the fourth  quarter of 2005, the Company  recorded  accruals
related  to a plan to exit  several  owned and  leased  Saucony  facilities,  to
combine the  operations  of these  facilities  within the  existing  Stride Rite
infrastructure,  and to terminate the  employment of  approximately  110 Saucony
employees worldwide due to identified synergies.

     Adjustments  to the  estimates  and  assumptions  used  in the  preliminary
purchase  price  result in an  offsetting  adjustment,  net of tax,  to acquired
goodwill in the year  following the  acquisition.  During the second  quarter of
2006, several of the acquisition-related accruals were adjusted. The adjustments
to the acquisition-related  severance accrual included reductions based on fewer
involuntary  terminations and  modifications to the original  estimates based on
actual-severance payments. The adjustments to the acquisition related exit costs
included  modifications  to the original  estimates  based on the  completion of
certain activities.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
Details of the acquisition related accruals are as follows:

<CAPTION>
                                              Acquisition    Acquisition
                                                Related        Related
(In thousands)                                 Severance      Exit Costs
-------------------------------------------   -------------  -------------
<S>                                               <C>               <C>
Balance at March 3, 2006                          $1,562            $934
Utilization                                       (1,052)           (485)
Adjustments                                         (325)            (93)
Foreign currency translation impact                    4               5
                                                  ------            ----
Balance at June 2, 2006                           $  189            $361
                                                  ======            ====
</TABLE>

     During the second  quarter of 2006 the Company  adjusted the valuation of a
certain  acquired  property,  classified  as an asset held for sale and  current
asset in the  accompanying  balance sheet as of June 2, 2006. The adjustment was
based on a signed purchase and sale agreement with an unrelated third party (See
Note 11 for additional  information).  The valuation of the property was reduced
by $793  thousand  with a  corresponding  adjustment,  net of tax,  to  acquired
goodwill.

     Additionally,  during the second quarter of 2006 the Company  purchased the
remaining 5% minority interest of Saucony,  Canada,  Inc. for approximately $850
thousand.  The purchase  resulted in an adjustment to the acquired fair value of
the related liability of approximately $73 thousand.

     Including adjustments to the related deferred tax accounts of approximately
$269 thousand,  the net aggregate effect of all adjustments to acquired goodwill
during the second quarter of fiscal 2006 was approximately $80 thousand.

     The following pro forma  information  presents the results of operations of
the Company as if the Saucony  acquisition  had taken place on December 4, 2004.
The pro forma results are not necessarily  indicative of the financial  position
or results of operations of the Company had the merger been  consummated  on the
date  indicated.  In  addition,  the  pro  forma  results  are  not  necessarily
indicative  of the  future  financial  condition  or  operating  results  of the
Company.

<TABLE>
                                        Pro forma               Pro forma
                                        ---------               ---------
<CAPTION>
                                   Three Months Ended        Six Months Ended
                                      June 3, 2005             June 3, 2005
              (In thousands)           (Unaudited)              (Unaudited)
              ----------------------------------------------------------------
<S>                                          <C>                  <C>
              Revenue                        $199,807             $392,345

              Operating Income                 20,994               39,088

              Net income                     $ 12,833             $ 23,580
                                             ========             ========

              Earnings per
              common share:
              Basic                             $0.35                $0.65
                                             ========             ========
              Diluted                           $0.35                $0.64
                                             ========             ========
</TABLE>




<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     The pro  forma  information  was  prepared  by  combining  Saucony,  Inc.'s
unaudited  condensed  consolidated  statements  of income for the  thirteen  and
twenty-six  weeks  ended  July 1,  2005 and the  Company's  unaudited  condensed
consolidated  statements  of income for the three and six  months  ended June 3,
2005. Pro forma  adjustments have been made to reflect the amortization  expense
relating to the finite life intangible  assets,  the changes in depreciation and
amortization  expense  resulting  from the  fair  value  adjustments  to the net
tangible assets, and interest expense relating to acquisition-related debt.

     No portion of the purchase  accounting  write up of inventory to fair value
has been  included in this pro forma  information  because of the  difficulty in
estimating such an adjustment under the LIFO inventory costing method.

Note 5 - Debt

     In connection with the  acquisition of Saucony,  the Company entered into a
five-year  revolving  credit  facility  pursuant  to a  Credit  Agreement  dated
September 16, 2005 (the "Credit  Agreement").  The Credit Agreement provides for
secured  revolving  loans  in an  aggregate  amount  up  to  $275  million  (the
"revolver"),  including a $75 million  sublimit  for the  issuance of letters of
credit and a $15  million  sublimit  for swing  line  loans,  with $200  million
currently  committed.  Borrowings  under the Credit  Agreement  are scheduled to
mature on September 16, 2010 and are  collateralized by substantially all of the
assets  of the  Company.  Refer  to Note  No.  7 in the  Company's  consolidated
financial  statements for the fiscal year ended December 2, 2005 as contained on
Form 10-K filed by the  Company  with the  Securities  and  Exchange  Commission
("SEC") on February  13, 2006 and the Form 8-K filed by the Company with the SEC
on September 22, 2005 for additional information.

     During the three and six months ended June 2, 2006,  borrowings  under this
Credit Agreement averaged $87.7 million and $82.7 million, respectively,  with a
maximum amount outstanding of $101.0 million. The weighted average interest rate
on these borrowings  during the three and six months ended June 2, 2006 was 6.0%
and 5.9%,  respectively.  On June 2, 2006, $68 million was outstanding under the
revolver.   Cash   interest   payments  were  $1.3  million  and  $2.4  million,
respectively,  in the three months and six months ended June 2, 2006. There were
no  borrowings  outstanding  at any time during the second  quarter of the prior
fiscal  year.  The Company was in  compliance  with its  covenants as of June 2,
2006.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Benefit Plans

<TABLE>
      The following table summarizes the components of net periodic benefit cost
for the Company:
                                       Three Months Ended     Six Months Ended
                                     ---------------------  --------------------
<CAPTION>
                                      June 2,    June 3,    June 2,     June 3,
                                       2006        2005       2006       2005
                                     ----------  ---------  ---------  ---------
                                                   (In thousands)
<S>                                       <C>       <C>      <C>          <C>
Service cost                             $570      $ 530    $ 1,140      $1,060
Interest cost                           1,029        955      2,058       1,910
Expected return on assets              (1,143)    (1,120)    (2,286)     (2,240)
Net loss recognized                       510        505      1,020       1,010
Amortization of prior services cost         3          5          6          10
                                      -------    -------    -------     -------

Net periodic benefit cost               $ 969      $ 875    $ 1,938      $1,750
                                        =====      =====    =======      ======
</TABLE>

     During the first six months of fiscal 2006, no  contributions  were made to
the Company's  defined  benefit pension plan. At this time, the Company does not
plan on making any  contributions to its defined benefit pension plan during the
2006 fiscal year.

Note 7 - Contingencies

     The sale of Tommy Hilfiger branded footwear is a significant portion of our
business.  The Tommy  Hilfiger  footwear  sales are  contingent on our licensing
agreement with Tommy Hilfiger Licensing, Inc. In January, 2004, we finalized the
terms of the current license agreement, which will expire in March, 2007. We are
currently  in  negotiations  with Tommy  Hilfiger  Corp.  to extend the  current
contract.  Whether our license with Tommy Hilfiger will remain in effect depends
in part on our achieving certain minimum sales levels for the licensed products.
We  expect to meet the  minimum  sales  levels  required  by the Tommy  Hilfiger
license  agreement or  renegotiate  the minimum  level down.  We believe that no
provision is currently  required for costs related to the potential loss of this
license;  however,  Tommy  Hilfiger  Corp.  has  recently  been  acquired  by an
unrelated third party. If we lose the Tommy Hilfiger license, our business would
be materially and adversely  affected.  Revenues derived from our Tommy Hilfiger
licenses  were  approximately  $25 million and $52 million for the three and six
months  ended  June 2, 2006.  This  revenue is  included  in the Tommy  Hilfiger
Footwear segment, the Other Wholesale Footwear segment  (specifically the Stride
Rite  International  division),  Stride Rite Children's Group - Retail Division,
and the Stride Rite Children's Group - Wholesale Division.

     In  December  of  2004,   Saucony,   Inc.  recorded  a  charge  to  address
environmental  conditions at a Saucony owned distribution facility. The facility
and the related  liability  were  acquired by the Company as part of the Saucony
acquisition  in September  2005.  The liability as of June 2, 2006 is $1,931,000
and is included as an accrued expense in the accompanying condensed consolidated
balance  sheet.   The  original   estimated  costs  ranged  from  $1,242,000  to
$4,621,000.  The Company's  management  determined that the liability was fairly
stated upon  acquisition.  The  assessment of the  liability and the  associated
costs are an estimate based upon available information
<PAGE>

PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

after  consultation  with  environmental  engineers,  consultants  and attorneys
assisting the Company in addressing these environmental  issues. Actual costs to
address   the   environmental   conditions   may  change   based  upon   further
investigations,  the  conclusions of regulatory  authorities  about  information
gathered in those investigations and due to the inherent  uncertainties involved
in estimating  conditions in the  environment  and the costs of addressing  such
conditions.  During  the  second  quarter  of the  fiscal  2006,  there were $24
thousand of expenses charged against the reserve.

Note 8 - Income Taxes

     During the  second  quarter of 2006,  a state tax audit was  concluded  for
which the Company had established  reserves in prior periods. The outcome of the
tax audit was  favorable  and  resulted in a net tax benefit of $4.2  million of
prior period tax reserve reversals. The reversals positively impacted the second
quarter effective income tax rate by 19.9%.

Note 9 - Operating Segments and Related Information

     In  September  2005 the Company  acquired  Saucony,  Inc.  During the first
quarter of 2006, a portion of Saucony's operations were integrated into existing
operating  segments of the Company.  As a result,  the Company  re-assessed  its
reportable  segments  under SFAS No.  131,  "Disclosures  about  Segments  of an
Enterprise and Related Information".

     The changes, which occurred during the first quarter of fiscal 2006, to the
Company's reportable segments are as follows: the Stride Rite Children's Group -
Retail Division includes the Saucony factory outlet stores (16 stores as of June
2, 2006); Saucony's international operations are now included in the Stride Rite
International  division  which is  aggregated  in the Other  Wholesale  Footwear
reportable  segment;  Saucony's domestic footwear  division,  which includes the
Hind unit, is now aggregated in the Other Wholesale Footwear reportable segment.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     As a result of the  adoption  of SFAS No. 123R at the  beginning  of fiscal
2006,  stock-based  compensation  costs of $0.9  million  and $1.6  million  are
included in the operating  loss of the  Unallocated  Corporate and Other segment
for the three and six months  ended June 2, 2006,  respectively.  See Note 1 for
further information.

<TABLE>
     The following  table  summarizes  the results of the  Company's  reportable
segments  for the  three  months  ended  June 2,  2006  and  June  3,  2005  and
identifiable assets as of June 2, 2006 and June 3, 2005:

              Stride      Stride
              Rite        Rite
<CAPTION>
Three months  Children's  Children's Tommy     Other      Unallocated
ended         Group -     Group -    Hilfiger  Wholesale  Corporate
June 2, 2006  Retail      Wholesale  Footwear  Footwear   & Other   Consolidated
              ------------------------------------------------------------------

Sales          $55,789    $18,292    $14,583   $108,239         -     $ 196,903

Intercompany
  sales              -        (28)      (537)    (2,331)        -        (2,896)

Net sales to
external
customers      $55,789    $18,264    $14,046   $105,908         -     $ 194,007
              ==================================================================

Operating
  (loss)
<S>            <C>        <C>         <C>      <C>       <C>          <C>
  Income       $ 9,064    $ 1,451     $ (761)  $ 16,181  $ (3,948)    $  21,987

Interest and
  other,
  net                -          -          -          -    (1,063)       (1,063)
              ------------------------------------------------------------------

Income
  (loss)before
  income
  taxes        $ 9,064    $ 1,451     $ (761)  $ 16,181  $ (5,011)     $ 20,924
              ==================================================================

Total assets   $42,532    $53,768    $13,889   $290,896  $ 57,328     $ 458,413
              ==================================================================

</TABLE>


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
              Stride     Stride
              Rite       Rite
<CAPTION>
Three months  Children's Children's Tommy    Other      Unallocated
ended         Group -    Group -    Hilfiger Wholesale  Corporate
June 3, 2005  Retail     Wholesale  Footwear Footwear   & Other     Consolidated
              ------------------------------------------------------------------

Sales         $45,977    $19,491    $ 24,558 $ 72,682          -       $162,708

Intercompany
  sales             -        (25)       (954)  (2,088)         -         (3,067)
              ------------------------------------------------------------------

Net sales to
external
customers     $45,977    $19,466    $ 23,604 $ 70,594          -       $159,641
              ==================================================================
Operating
  income
<S>           <C>        <C>        <C>      <C>         <C>           <C>
  (loss)      $ 5,636    $ 1,781    $    556 $ 11,898    $(1,688)      $ 18,183

Interest and
  other,
  net               -          -           -        -        208            208
              ------------------------------------------------------------------

Income
  (loss)
  before
  income
  taxes       $ 5,636    $ 1,781    $    556 $ 11,898   $ (1,480)      $ 18,391
              ==================================================================
Total assets  $38,061    $60,942    $ 23,727 $ 91,656   $114,591       $328,977
              ==================================================================
</TABLE>



<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
     The following  table  summarizes  the results of the  company's  reportable
segments for the six months ended June 2, 2006 and June 3, 2005:

               Stride     Stride
               Rite       Rite
               Children's Children's Tommy     Other     Unallocated
<CAPTION>
Six months     Group -    Group -    Hilfiger  Wholesale Corporate
ended          Retail     Wholesale  Footwear  Footwear  & Other    Consolidated
June 2, 2006
              -------------------------------------------------------------

Sales         $ 93,713    $ 39,448   $ 29,516  $221,199         -     $ 383,876

Intercompany
  sales              -         (55)    (1,402)   (4,996)        -        (6,453)
              ------------------------------------------------------------------

Net sales to
  external
  customers   $ 93,713    $ 39,393   $ 28,114  $216,203         -     $ 377,423
              ==================================================================

Operating
  income
<S>           <C>         <C>        <C>       <C>        <C>          <C>
  (loss)      $  6,158    $  4,253   $ (1,098) $ 34,110   $(7,113)     $ 36,310

Interest and
  other,
  net                -           -          -         -    (1,887)       (1,887)
              ------------------------------------------------------------------

Income
  (loss)
  before
  income
  taxes       $  6,158    $  4,253   $ (1,098) $ 34,110  $ (9,000)     $ 34,423
              ==================================================================
</TABLE>


<TABLE>
              Stride      Stride
              Rite        Rite
<CAPTION>
Six months    Children's  Children's Tommy     Other     Unallocated
ended         Group -     Group -    Hilfiger  Wholesale Corporate
June 3, 2005  Retail      Wholesale  Footwear  Footwear  & Other   Consolidated
              ------------------------------------------------------------------

Sales         $ 81,422    $ 45,078   $ 42,680  $146,734         -     $ 315,914

Intercompany
  sales              -         (51)    (1,795)   (3,836)        -        (5,682)
              ------------------------------------------------------------------

Net sales to
external
customers     $ 81,422    $ 45,027   $ 40,885  $142,898         -     $ 310,232
              ==================================================================

Operating
  income
<S>           <C>         <C>        <C>       <C>       <C>          <C>
  (loss)      $  5,102    $  5,819   $   (671) $ 25,330  $ (4,316)    $  31,264

Interest and
  other,
  net                -           -          -         -       370           370
              ------------------------------------------------------------------

Income
  (loss)
  before
  income
  taxes       $  5,102    $  5,819   $   (671) $ 25,330  $ (3,946)      $31,634
              ==================================================================
</TABLE>



<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Recent Accounting Pronouncements

     In March 2005,  FASB issued FASB  Interpretation  No. 47,  "Accounting  for
Conditional Asset Retirement  Obligations" ("FIN 47"), an interpretation of SFAS
No. 143, "Accounting for Asset Retirement  Obligations" ("SFAS No. 143"). FIN 47
clarifies that a "conditional asset retirement obligation",  as used in SFAS No.
143,  refers to a legal  obligation to perform an asset  retirement  activity in
which the timing and (or) the method of settlement  are  conditional on a future
event that may or may not be within  control of an  entity.  The  interpretation
also  clarifies  that an entity should record the fair value of such a liability
when it can be reasonably estimated. The entity shall recognize such a liability
as a cumulative  change in accounting  principle.  The  provisions of FIN 47 are
effective no later than the end of fiscal years ending after  December 15, 2005;
therefore  effective  at the  Company's  2006  fiscal  year end.  The Company is
currently  evaluating  the  provisions  of FIN 47 to determine the impact on our
financial position, results of operations, and cash flow.


Note 11 - Subsequent Events

     On June 15, 2006, the Company sold the former  Saucony,  Inc.  headquarters
located in Peabody, Massachusetts for $7.5 million, net of costs to sell.

     On June 29, 2006 the Company adopted changes to its defined benefit pension
plan and defined  contribution plans effective December 31, 2006 and January 31,
2007, respectively. The changes to the plans include (1) stopping the accrual of
future  benefits  in the  Company's  defined  benefit  pension  plan  and  fully
preserving  all  retirement  benefits  that  employees  will  have  earned as of
December 31, 2006, and (2) redesigning the 401(k) savings plans to significantly
improve  the  Company-funded  contribution  so that there is a dollar for dollar
Company match on up to six percent of salary deferrals starting January 1, 2007.


<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

Overview

     The following discusses The Stride Rite Corporation's results of operations
and liquidity and capital resources. The discussion,  including known trends and
uncertainties  identified by management,  should be read in conjunction with the
condensed consolidated financial statements and related notes.

     This Form 10-Q contains  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange Act of 1934. We caution investors that any  forward-looking
statements  presented in this report and presented  elsewhere by management from
time to time are based on  management's  beliefs  and  assumptions  made by, and
information   currently   available  to,   management.   When  used,  the  words
"anticipate",   "believe",   "expect",   "intend",  "may",  "plan",  "estimate",
"project",  "should",  "will be" and  similar  expressions  which do not  relate
solely to historical matters identify forward-looking statements.  Investors are
cautioned that  forward-looking  statements are subject to risks,  uncertainties
and  assumptions  and are not  guarantees  of future  performance,  which may be
affected by known and unknown risks, trends,  uncertainties and factors that are
beyond  our  control.  Should  one or  more  of  these  risks  or  uncertainties
materialize,  or should underlying  assumptions prove incorrect,  actual results
may vary materially from those anticipated, estimated or projected. We expressly
disclaim any responsibility to update forward-looking  statements.  Accordingly,
past results and trends  should not be used by investors  to  anticipate  future
results or trends.

     Risks and  uncertainties  that may affect future  performance  are detailed
from  time to time in  reports  filed by the  Company  with the  Securities  and
Exchange Commission,  including Forms 10-Q and 10-K, and include,  among others,
the  following:  the  possible  failure  to retain the Tommy  Hilfiger  footwear
license;  increased  leverage  from the  financing  of our  recent  acquisition;
international,  national and local general economic and market  conditions;  the
size and growth of the overall  footwear  and  general  retail  market;  intense
competition  among designers,  marketers,  distributors and sellers of footwear;
demographic  changes;  changes  in  consumer  fashion  trends  that may shift to
footwear  styling not  currently  included in our product  lines;  popularity of
particular  designs and categories of products;  seasonal and geographic  demand
for the Company's products;  difficulties in anticipating or forecasting changes
in  consumer  preferences;  delays in the  opening of new  stores;  unseasonable
weather;  difficulties in implementing,  operating and maintaining the Company's
complex information  systems and controls,  including,  without limitation,  the
systems  related to the Company's  retail stores,  systems related to demand and
supply planning, and inventory control; interruptions in data and communications
systems;  fluctuations  and difficulty in  forecasting  operating  results;  the
ability  of  the  Company  to  sustain,   manage  or  forecast  its  growth  and
inventories;  the size,  timing and mix of purchases of the Company's  products;
the underperformance or delay of new products; the ability to secure and


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

protect  trademarks,  patents  and  other  intellectual  property;  performance
and reliability of products;  customer service;  adverse publicity;  the loss of
significant  suppliers or  customers,  such as  department  stores and specialty
retailers, the consolidation or restructuring of such customers, including large
chain and department stores, which may result in unexpected store closings;  the
Company's   reliance  on  independent   manufacturers  in  China  and  potential
disruptions  in  such  manufacturing  caused  by  difficulties  associated  with
political instability in China, the occurrence of a natural disaster or outbreak
of a pandemic disease in China or labor shortages or work stoppages; the ability
to  secure  raw   materials;   delays  and   increased   costs  of  freight  and
transportation  to meet  delivery  deadlines;  changes in  business  strategy or
development  plans;  general risks  associated  with doing business  outside the
United States, including, without limitation, import duties, tariffs, quotas and
political  and  economic  instability;  acts  of war or  terrorism;  changes  in
government regulations; liability and other claims asserted against the Company;
the  ability  to attract  and  retain  qualified  personnel;  and other  factors
referenced or incorporated by reference in this report and other reports.

     The risks set forth above are not exhaustive. Other sections of this report
may include  additional  factors  which  could  adversely  affect the  Company's
business and financial  performance.  Moreover,  the Company  operates in a very
competitive and rapidly changing environment.  New risk factors emerge from time
to time and it is not possible for  management to predict all such risk factors,
nor can it assess the impact of all such risk factors on the Company's  business
or the extent to which any factor,  or combination of factors,  may cause actual
results  to  differ  materially  from  those  contained  in any  forward-looking
statements.  Given these  risks and  uncertainties,  investors  should not place
undue reliance on forward-looking  statements as a prediction of actual results.
Investors should also refer to our annual reports on Form 10-K and our quarterly
reports on Form 10-Q for future  periods and current  reports on Form 8-K as the
Company files them with the SEC, and to other  materials the Company may furnish
to the public from time to time through Forms 8-K or otherwise.

     Investors should also be aware that while the Company does communicate with
securities  analysts  from time to time, it is against our policy to disclose to
them any material  non-public  information  or other  confidential  information.
Accordingly,  investors  should not assume that we agree with any  statement  or
report  issued by any analyst  irrespective  of the content of the  statement or
report.  Furthermore,  the Company has a policy  against  issuing or  confirming
financial  forecasts or projections issued by others.  Therefore,  to the extent
that reports issued by securities analysts contain any projections, forecasts or
opinions, such reports are not the responsibility of the Company.

     The Company  discussed a number of significant  trends and specific factors
affecting  the footwear  industry in general and our business in  particular  in
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations",  Item 7 of our Annual Report on Form 10-K for the fiscal year 2005.
Those trends and factors  continue to be relevant to the  Company's  performance
and financial condition.


<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

     The  preparation  of  financial   statements  and  related  disclosures  in
conformity with generally  accepted  accounting  principles in the United States
requires management to make judgments, assumptions and estimates that affect the
amounts reported. Please refer to the discussion of critical accounting policies
and  estimates in the  Company's  Annual Report on Form 10-K for the fiscal year
ended December 2, 2005 for additional information.

     At the beginning of the 2006 fiscal year the Company adopted SFAS No. 123R,
Share-Based  Payment,  using the  modified  prospective  application  transition
method,  which  requires  the  Company to develop  assumptions  that are used to
estimate the fair value of share-based compensation.

     The Company has elected to use the Black  Scholes  option-pricing  model to
calculate these fair values. The Black Scholes model requires the development of
assumptions for the six variables that are input into the model. These variables
are the price of the underlying  stock;  the exercise  price of the option;  the
expected  term of the  option;  the  annual  risk-free  interest  rate  over the
option's  expected term; the expected stock price  volatility  over the option's
expected term; and the expected annual dividend yield on the underlying stock.

     The weighted  average  expected  life of options was  calculated  using the
simplified  method as prescribed  by the  Securities  and Exchange  Commission's
Staff  Accounting  Bulletin  No.  107.  This  decision  was based on the lack of
relevant  historical data due to both decreasing the option's  contractual  term
from 10 years to 7 years and  increasing  the  vesting  period from 3 years to 4
years for options that were granted  starting in fiscal year 2005. The risk-free
interest rate  assumptions were based on the United States  Treasury's  constant
maturity's  rate for the term of the expected life of the option on the date the
option was granted.  The volatility  assumption  was based on weekly  historical
volatility  during the time period that  corresponds  to the  expected  weighted
average  life of the  option.  The  assumed  dividend  yield  was  based  on the
Company's  expectation of future dividend payouts.  The post-vesting  forfeiture
rate was based on the four year historical  average turnover rate for two groups
of option eligible employees.

     Developing these assumptions  requires  significant judgment on the part of
the Company and, generally, may involve analyzing all available historical data,
considering  whether  historical data is relevant to predicting future behavior,
making  appropriate  adjustments  to  historical  data for future  expectations,
supplementing or replacing company-specific historical data with data from other
supportable  sources  and  appropriately  weighing  each  of the  inputs.  These
assumptions are evaluated and revised, as necessary,  based on changes in market
conditions and historical experience.



<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

     Effective at the  commencement of the January 1, 2006  withholding  period,
the Employee Stock Purchase Plan ("ESPP")  shortened its withholding  periods to
three months,  increased the purchase  price from 85% of the market value to 95%
of the market value and eliminated  the look-back  provision to the start of the
withholding  period.  The  changes  made  to the  ESPP  resulted  in the  plan's
qualification as non-compensatory under SFAS No. 123R.

     The  Company  does not  currently  expect  to change  the level of  options
granted.

     Please refer to Footnote Number One in Item I, Part I of this Form 10-Q for
further information.


Contingencies

     The sales of Tommy Hilfiger branded  footwear are a significant  portion of
our business.  The Tommy Hilfiger footwear sales are contingent on our licensing
agreement with Tommy Hilfiger Licensing, Inc. In January, 2004, we finalized the
terms  of the  license  agreement,  which  will  expire  in March  2007.  We are
currently  in  negotiations  with Tommy  Hilfiger  Corp.  to extend the  current
contract.  Whether our license with Tommy Hilfiger will remain in effect depends
in part on our achieving certain minimum sales levels for the licensed products.
We  expect to meet the  minimum  sales  levels  required  by the Tommy  Hilfiger
license  agreement or  renegotiate  the minimum  level down.  We believe that no
provision is currently  required for costs related to the potential loss of this
license;  however,  Tommy  Hilfiger  Corp.  has  recently  been  acquired  by an
unrelated third party. If we lose the Tommy Hilfiger license, our business would
be materially and adversely  affected.  Revenues derived from our Tommy Hilfiger
licenses  were  approximately  $25 million and $52 million for the three and six
months June 2, 2006.  This  revenue is included in the Tommy  Hilfiger  Footwear
segment,  the Other Wholesale  Footwear  segment  (specifically  the Stride Rite
International division),  Stride Rite Children's Group - Retail Division and the
Stride Rite Children's Group - Wholesale Division.

Results of Operations

<TABLE>
     The following  table  summarizes the Company's  performance  for the second
quarter of fiscal  2006 as compared to the results for the same period in fiscal
2005:

<CAPTION>
                                                    Percentage Increase
                                            Second Quarter      Six Months

<S>                                               <C>              <C>
 Net sales                                        21.6%            21.7%
 Gross profit                                     26.2%            23.7%
 Selling and administrative expenses              28.2%            26.2%
 Operating income                                 20.9%            16.1%
 Income before income taxes                       13.8%             8.8%
 Net income                                       43.7%            26.4%
</TABLE>



<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

<TABLE>
                                               Percentage of Net Sales
                                         Second Quarter       Six Months
                                       --------------------------------------
<CAPTION>
                                         2006      2005     2006      2005
                                       --------------------------------------

<S>                                       <C>       <C>       <C>      <C>
 Gross profit                             42.4%     40.8%     41.2%    40.5%
 Selling and administrative expenses      31.1%     29.5%     31.6%    30.5%
 Operating income                         11.3%     11.4%      9.6%    10.1%
 Income before income taxes               10.8%     11.5%      9.1%    10.2%
 Net income                                8.7%      7.4%      6.7%     6.4%
</TABLE>




<PAGE>


PART I - FINANCIAL INFORMATION (Continued)
                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

Second Quarter of 2006 Compared to the Second Quarter of 2005

Net Sales
<TABLE>
      The second quarter breakdown of net sales is as follows:
                                                                       Percent
                                                                        Change
                                                                        2006 vs.
<CAPTION>
                                              2006          2005         2005
                                           ------------  ------------  ----------
(In millions, except percentages)
<S>                                              <C>           <C>        <C>
Stride Rite Children's Group - Wholesale         $18.3         $19.5      (6.2)%
Stride Rite Children's Group - Retail             55.8          46.0      21.3%
                                           ------------  ------------  ---------
Stride Rite Children's Group                      74.1          65.5      13.1%

Keds                                              34.9          41.7     (16.3)%
Sperry Top-Sider                                  28.5          23.1      23.4%
Stride Rite International                         19.2           7.9     143.0%
Saucony                                           25.6             -       n/a
                                           ------------  ------------  ---------
Other Wholesale Footwear                         108.2          72.7      48.8%

Tommy Hilfiger Footwear                           14.6          24.6     (40.7)%

Elimination of intercompany sales                (2.9)          (3.2)      n/a
                                           ------------  ------------  ---------

Total net sales                                 $194.0        $159.6      21.6%
                                           ============  ============  =========
</TABLE>

     During the second quarter of fiscal 2006,  consolidated net sales increased
$34.4 million to $194.0 million,  or 21.6% above the sales level achieved in the
second quarter of fiscal 2005.  Wholesale net sales  increased  $24.1 million or
21.3% for the second quarter of 2006,  and overall  retail sales,  including the
e-commerce  sites,  increased  $10.3  million or 22.0% when compared to the same
period in the prior year.  Unit shipments of first quality  merchandise  for the
wholesale  brands during the second quarter were 3.3% higher than the comparable
period in 2005.  The Company's  average first  quality  wholesale  selling price
increased  19.9% from the second  quarter of 2005 which was primarily due to the
addition of Saucony.

     First quality  wholesale  net sales  increased by $24.6  million,  or 24.1%
above the  wholesale  net sales level  achieved in the second  quarter of fiscal
2005. This includes the negative  impact of a $1.3 million  increase in combined
discounts,  returns and allowances.  Sales of closeout  products  decreased $700
thousand from the comparable period in the 2005 fiscal year.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

Gross Profit

     During the second  quarter of fiscal 2006,  the  Company's  gross profit of
$82.3 million  increased $17.1 million or 26.2% above the amount recorded during
fiscal 2005's second  quarter.  The gross profit  percentage rate for the fiscal
2006 second quarter increased 1.6 percentage  points to 42.4%,  versus the 40.8%
rate  achieved in the prior  year's  second  quarter.  The higher  gross  profit
percentage was largely attributable to the significant increase in first quality
sales in the second  quarter of fiscal 2006 as compared to the second quarter of
fiscal 2005.

Operating Costs

     During  the second  quarter  of fiscal  2006,  selling  and  administrative
expenses were $60.3  million,  an increase of $13.3 million or 28.2% as compared
to the second quarter of fiscal 2005.  This increase was  principally the result
of the  inclusion  of  Saucony  which  added  $8.7  million  in  expenses.  Also
contributing  to the higher  expense levels in the second quarter of fiscal 2006
was $2.7 million in added costs  associated with the increased  number of Stride
Rite Children's Group retail stores including  Saucony's  factory outlet stores.
In  addition,  the  second  quarter  of 2006  included  $1.0  million of Saucony
integration  expenses  and $0.8  million of  expenses  relating  to  share-based
compensation  from the  adoption  of SFAS No.  123(R).  As a  percent  of sales,
operating  costs were 31.1% in the second  quarter of fiscal  2006  compared  to
29.5% in the second quarter of fiscal 2005.

Other Income and Taxes

     Investment  income related to the Company's cash equivalents and marketable
securities was $0.3 million in the second quarter of fiscal 2006, which was down
slightly as compared to the similar  period in fiscal  2005.  Interest  expense,
which relates to borrowings under the revolving credit  agreement,  increased by
$1.3  million in the second  quarter of fiscal  2006 as  compared  to the second
quarter of fiscal 2005 as no borrowings  were made during the second  quarter of
fiscal 2005.

     The provision for income taxes decreased $2.6 million in the second quarter
of fiscal 2006 as compared to the similar  period in fiscal 2005.  This decrease
was primarily  attributable to the favorable outcome of a state tax audit in the
second  quarter of fiscal  2006,  which  resulted  in a net tax  benefit of $4.2
million.  As a result, our effective tax rate was 19.3% in the second quarter of
fiscal 2006 as compared to 36.1% in the second quarter of fiscal 2005.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

Net Income

     Net income for the second  quarter  of fiscal  2006 was $16.9  million,  an
increase of $5.1  million,  or 43.7% as compared to the same period in the prior
year.  The higher net sales and resulting  gross profit,  due to the addition of
Saucony,  were able to offset the corresponding  increases in operating expenses
and interest  expense.  Additionally,  a lower tax provision  resulting from the
reversal of certain prior period  reserves for income tax  exposures  related to
the favorable  outcome of a state tax audit  combined with the other factors and
significantly increased net income.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

Segments Review

     In  September  2005 the Company  acquired  Saucony,  Inc.  During the first
quarter  of  2006  Saucony's   operations  were  integrated  into  the  existing
operations of the Company.  As a result,  the Company  re-assessed its operating
and reportable  segments under SFAS No. 131,  "Disclosures  about Segments of an
Enterprise and Related Information".  The changes to the Company's segments were
as follows:  the Stride Rite Children's Group - Retail Division now includes the
Saucony  factory  outlet  stores  (16  stores  as of  June 2,  2006);  Saucony's
international  operations  are now  included  in the Stride  Rite  International
division,  which  is  aggregated  in the  Other  Wholesale  Footwear  reportable
segment,  and the Saucony domestic  footwear  division,  which includes the Hind
unit, is also aggregated into the Other Wholesale Footwear reportable segment.

Stride Rite Children's Group - Retail

     The  net  sales  of the  Stride  Rite  Children's  Group -  Retail  segment
increased  $9.8  million or 21.3% in the second  quarter as compared to the same
quarter in the prior year.  Sales at comparable  Children's  Group retail stores
(stores  open for 52 weeks in each fiscal  year)  increased  8.7% for the second
fiscal  quarter of 2006.  The  increase in the  comparable  stores  category was
principally   attributable  to  the  shift  of  the  annual  pre-Easter  holiday
promotional  event into the second  quarter of fiscal  2006,  as compared to the
earlier  timing of the event during the first quarter of fiscal 2005. At the end
of the second quarter of fiscal 2006, the Stride Rite Children's  Group - Retail
operated  288 Stride  Rite  children's  shoe stores and  outlets.  This is a net
increase  of 29 stores,  or 11.2%  from the end of the same  period in the prior
year. In addition Stride Rite Children's Group-Retail operated 16 Saucony outlet
stores.  Current plans for fiscal 2006 call for the opening of  approximately 33
retail stores and the closing of 4  underperforming  Saucony outlet stores and 2
underperforming  children's  shoe stores.  During the second quarter of 2006 the
Company opened 9 new stores.

     The Stride Rite Children's Group - Retail operating income increased versus
last year primarily due to the increased sales brought about by the shift in the
pre-Easter  sales  event out of the first  quarter  for fiscal 2005 and into the
second quarter during fiscal 2006.

Stride Rite Children's Group - Wholesale

     Sales  decreased  $1.2 million or 6.2% during the second quarter of 2006 as
compared to the same quarter  last year.  This  decrease in sales was  primarily
attributable to a value channel strategy change, certain department store buying
pattern shifts, the consolidation of May and Federated  department stores, and a
decline in smaller independent accounts.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

     Operating income for the Stride Rite Children's Group - Wholesale decreased
versus the  comparable  period in the prior year and was impacted by lower sales
and a less profitable product mix.

Tommy Hilfiger Footwear, Inc.

     The decrease in sales of Tommy Hilfiger footwear products during the second
quarter of fiscal 2006 versus the comparable  period in the prior year was based
on declines in all retail channels. A similar decline is expected for the second
half of the 2006 fiscal year.

     The increase of the Tommy  Hilfiger  operating  loss versus the  comparable
period in the prior  year was  primarily  attributable  to the  decrease  in net
sales.  The  impact  from the  decrease  in net  sales was  partially  offset by
reductions  in  operating  expenses  in the  second  quarter  of fiscal  2006 as
compared to the same period last year.

Other Wholesale Footwear

     The overall  increase in net sales versus last year of the Other  Wholesale
Footwear  segment was primarily  attributable to the addition of Saucony as well
as increased sales of Sperry Top-Sider and Stride Rite  International  which now
includes the foreign distribution of Saucony products. This overall increase was
partially offset by a decrease in Keds sales.

     Saucony's  domestic  sales added  $25.6  million of net sales in the second
quarter of 2006.  Saucony's net sales are meeting the Company's  expectations on
the  continued  strength of the  technical  running  products  and growth in the
specialty run business.

     The Sperry  Top-Sider sales increase was largely  attributable to continued
strong sales of their men's and women's product lines. The significant growth in
the Sperry Top-Sider product sales in 2006 resulted from increases in the marine
and family  shoe  retail  channels.  This trend is  expected  to continue in the
second half of fiscal 2006.

     The Stride Rite  International  division's  net sales  growth in the second
quarter  of fiscal  2006 was  primarily  the  result of strong  sales of Saucony
products in Europe.  In addition,  Tommy Hilfiger sales  increased in Canada and
Latin America,  Keds sales increased in Canada and Sperry Top-Sider's sales also
increased in Europe.



<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

     The Keds sales decline in the second quarter of fiscal 2006 versus the same
period last year was partially due to weaker retail channel performance from the
Champion and  Microstretch  product lines. The stronger sell-in to the specialty
premier  retail channel based on the more youthful  silhouette  strategy was not
able to offset  these sales  declines.  The  consolidation  of May Company  into
Federated  Department Stores also negatively  impacted Keds sales in the quarter
and is expected to continue to do so for the remainder of the fiscal year.

     The increased  operating  income versus the comparable  period in the prior
year in this segment was primarily the result of the addition of Saucony and the
increase in sales of Stride Rite International and Sperry Top-Sider which offset
the weaker Keds results.

First Six Months of 2006 Compared to the First Six Months of 2005

Net Sales

<TABLE>
      The first six months breakdown of net sales is as follows:
                                                                       Percent
                                                                        Change
                                                                        2006 vs.
<CAPTION>
                                              2006          2005         2005
                                           ------------  ------------  ----------
(In millions, except percentages)
<S>                                             <C>           <C>        <C>
Stride Rite Children's Group - Wholesale        $ 39.5        $ 45.1     (12.4)%
Stride Rite Children's Group - Retail             93.7          81.4      15.1%
                                           ------------  ------------  ---------
Stride Rite Children's Group                     133.2         126.5       5.2%

Keds                                              76.9          87.5     (12.1)%
Sperry Top-Sider                                  52.1          42.5      22.6%
Stride Rite International                         42.0          16.7     151.5%
Saucony                                           50.2             -       n/a
                                           ------------  ------------  ---------
Other Wholesale Footwear                         221.2         146.7      50.8%

Tommy Hilfiger Footwear                           29.5          42.7     (30.9)%

Elimination of intercompany sales                 (6.5)         (5.7)      n/a
                                           ------------  ------------  ---------

Total net sales                                $ 377.4       $ 310.2      21.7%
                                           ============  ============  =========
</TABLE>

     During  the  first  six  months  of  fiscal  2006,  consolidated  net sales
increased  $67.2  million  to $377.4  million,  or 21.7%  above the sales  level
achieved in the first six months of fiscal 2005.  Wholesale net sales  increased
$54.3  million or 23.9% for the first six  months of 2006,  and  overall  retail
sales,  including the e-commerce  sites,  increased  $12.9 million or 15.5% when
compared to the same period in the prior year.  Unit  shipments of first quality
merchandise  for the  wholesale  brands  during the first six months  were 10.6%
higher  than the  comparable  period  in 2005 and the  Company's  average  first
quality  wholesale  selling price  increased  12.7% from the first six months of
2005. The addition of Saucony was largely responsible for these increases.
<PAGE>

PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

     First quality  wholesale  net sales  increased by $53.3  million,  or 25.3%
above the wholesale  net sales level  achieved in the first six months of fiscal
2005. This includes the negative  impact of a $2.7 million  increase in combined
discounts,  returns and allowances.  Sales of closeout  products  increased $1.7
million from the comparable period in the 2005 fiscal year.

Gross Profit

     During the first six months of fiscal 2006,  the Company's  gross profit of
$155.5 million increased $29.8 million or 23.7% above the amount recorded during
the first six months of fiscal 2005.  The gross profit  percentage  rate for the
first six months of fiscal 2006 improved 0.7 percentage points to 41.2%,  versus
the 40.5% rate  achieved in the same period in the prior fiscal year.  The gross
profit percentage was adversely affected by the additional first quarter pre-tax
expense of $2.6 million  relating to the flow through of the remaining  purchase
accounting  inventory  write-up  to fair value that was  recorded as part of the
Saucony acquisition.  The effect of this item on the gross profit percentage was
offset by  significantly  higher first  quality sales in the first six months of
fiscal 2006.

Operating Costs

     During  the first six months of fiscal  2006,  selling  and  administrative
expenses were $119.2 million,  an increase of $24.7 million or 26.2% as compared
to the first six months of fiscal 2005. This increase was principally the result
of the  inclusion  of  Saucony  which  added  $17.1  million in  expenses.  Also
contributing to the higher expense levels in the first six months of fiscal 2006
was the $5.2  million in added costs  associated  with the  increased  number of
Stride Rite  Children's  Group retail stores which  includes  Saucony's  factory
outlet  stores.  In addition,  the first six months of fiscal 2006 included $2.2
million of Saucony integration expenses and $1.6 million of expenses relating to
share-based  compensation  upon  adoption  of SFAS No.  123(R).  As a percent of
sales,  operating  costs  were  31.6% in the  first six  months  of fiscal  2006
compared to 30.5% in the first six months of fiscal 2005.

Other Income and Taxes

     Investment  income related to the Company's cash equivalents and marketable
securities  was $0.8 million in the first six months of fiscal  2006,  which was
increased $0.1 million versus the same period in fiscal 2005.  Interest expense,
which relates to borrowings under the revolving credit  agreement,  increased by
$2.4 million in the first six months of fiscal 2006 as compared to the first six
months of fiscal 2005 as no borrowings  were made during the first six months of
fiscal 2005.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)


                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

     The  provision  for income  taxes  decreased  $2.5 million in the first six
months of fiscal  2006 as  compared  to the same  period  in fiscal  2005.  This
decrease was  primarily  attributable  to the  favorable  outcome of a state tax
audit in the second  quarter of fiscal 2006 which  resulted in a net tax benefit
of $4.2  million.  Our  effective  tax rate was 26.9% in the first six months of
fiscal 2006 as compared to 37.1% in the first six months of fiscal 2005.

Net Income

     Net income for the first six months of fiscal  2006 was $25.2  million,  an
increase of $5.3  million,  or 26.4% as compared to the same period in the prior
fiscal  year.  The  higher  net sales and  resulting  gross  profit,  due to the
addition  of  Saucony,  were  able to  offset  the  corresponding  increases  in
operating expenses and interest expense. Also contributing to the increase was a
lower tax provision  resulting from the second quarter reversal of certain prior
period  reserves for income tax exposures  that are no longer  required based on
the favorable outcome of a state tax audit.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

Segments Review

     In  September  2005 the Company  acquired  Saucony,  Inc.  During the first
quarter  of  2006  Saucony's   operations  were  integrated  into  the  existing
operations of the Company. As a result, during the first quarter of fiscal 2006,
the Company  re-assessed  its operating and  reportable  segments under SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information".  The
changes to the Company's  segments were as follows:  the Stride Rite  Children's
Group - Retail Division includes the Saucony factory outlet stores (16 stores as
of June 2, 2006); Saucony's international  operations are included in the Stride
Rite International division, which is aggregated in the Other Wholesale Footwear
reportable  segment and the Saucony domestic footwear  division,  which includes
the Hind  unit,  is  aggregated  into the Other  Wholesale  Footwear  reportable
segment.

Stride Rite Children's Group - Retail

     The net  sales  of the  Stride  Rite  Children's  Group -  Retail  division
increased $12.3 million or 15.1% in the first six months as compared to the same
period in the prior fiscal year.  Sales at  comparable  Children's  Group retail
stores  (stores  open for 52 weeks in each fiscal year)  increased  3.4% for the
first  six  months of  fiscal  2006.  We expect  continued  sales  increases  at
comparable Children's Group retail stores for the second half of fiscal 2006. At
the end of the first six months of fiscal 2006, the Stride Rite Children's Group
- Retail operated 288 Stride Rite children's shoe stores and outlets.  This is a
net increase of 29 stores, or 11.2% from the end of the same period in the prior
year.  In addition  Stride Rite  Children's  Group - Retail  operated 16 Saucony
outlet  stores.   Current  plans  for  fiscal  2006  call  for  the  opening  of
approximately  33 retail  stores and the  closing of 4  underperforming  Saucony
outlet stores and 2 underperforming children's shoe stores. During the first six
months of 2006 the  Company  opened 17 new stores  and closed 3  underperforming
Saucony outlet store locations.

     The  Stride  Rite  Children's  Group - Retail  operating  income  increased
primarily due to increased net sales and decreased operating expenses.

Stride Rite Children's Group - Wholesale

     Sales  decreased  $5.6 million or 12.4% during the first six months of 2006
as compared to the same quarter last year. The decrease in the net sales for the
first six months of fiscal 2006 were  affected by changes in the product flow of
certain  department  stores,  value  channel  buying  patterns  and a decline in
smaller independent  accounts. We expect sales in the second half of fiscal 2006
to be flat to down slightly based on these trends.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

     The Stride Rite  Children's  Group -  Wholesale  operating  income  decline
versus the prior year was primarily  related to the impact of the lower sales in
the first six months of fiscal  2006  compared to the same period in fiscal 2005
combining with a lower gross profit rate due to a shift in product mix.

Tommy Hilfiger Footwear, Inc.

     The decrease in sales of Tommy Hilfiger  footwear products during the first
six months of fiscal 2006 was across all retail  channels.  A similar decline is
expected for the second half of fiscal 2006.

     The  increase of the Tommy  Hilfiger  operating  loss versus prior year was
primarily attributable to the decrease in net sales. The impact of the operating
loss was  partially  offset by  decreased  operating  expenses  in the first six
months of fiscal 2006 as compared to the same period in the prior fiscal year.

Other Wholesale Footwear

     The overall  increase in net sales of the Other Wholesale  Footwear segment
was primarily attributable to the addition of Saucony as well as increased sales
of Sperry Top-Sider and Stride Rite International which now includes the foreign
distribution of Saucony products.  This overall increase was partially offset by
a decrease in Keds sales.

     Saucony's  domestic  sales added $ 50.2 million to net sales and is meeting
the Company's  expectations on the continued  strength of the technical  running
products and growth in the specialty run business.

     The Sperry Top-Sider  increase was largely  attributable to strong sales of
the men's and women's product lines,  particularly in the marine and family shoe
channels.

     The Stride Rite International  division's net sales growth in the first six
months of fiscal  2006 was  primarily  the  result  of strong  sales of  Saucony
products in Canada.  In addition,  Tommy Hilfiger sales  increased in Canada and
Latin America, Keds sales increased in Canada, and Sperry Top-Sider's sales also
increased in Europe.



<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

     The Keds sales  decline  during the first six months of fiscal  2006 versus
the same  period  last year was  partially  attributable  to a  decrease  in the
department store and value sales channels. The consolidation of May Company into
Federated  Department Stores has negatively impacted Keds sales in the first six
months and is  expected to  continue  to do so for the  remainder  of the fiscal
year. These decreases were partially offset by stronger sell-in to the specialty
premium retail channel.

     The  increased  operating  income  versus  prior year in this  segment  was
primarily  the result of the  addition of Saucony  and the  increase in sales of
Stride Rite International and Sperry Top-Sider. The increase was somewhat offset
by a lower  gross  profit  performance  of Saucony in the first  quarter of 2006
resulting from the flow through of the remaining purchase accounting write-up of
acquired inventory to fair value.

Liquidity and Capital Resources

     At the  end of the  second  fiscal  quarter  of  2006,  our  balance  sheet
reflected  a current  ratio of 4.4 to 1.0 with $68.0  million in long term debt.
Our cash, cash  equivalents and marketable  securities  totaled $23.3 million at
June 2, 2006, a decrease of $47.0 million from the total cash, cash  equivalents
and  marketable  securities of $70.3 million at the end of the second quarter of
fiscal 2005.  The decrease in our cash balance,  versus the  comparable  quarter
last  year,  is  primarily  attributable  to  funding a portion  of the  Saucony
acquisition which was completed in September 2005.

     The Company's seasonal cash flow patterns typically require the use of cash
during the first and second  quarters of our fiscal  year.  During the first six
months of fiscal 2006, the Company used $1.8 million of cash to fund  operations
as  compared  to $13.8  million  to fund  operations  in the first six months of
fiscal 2005.  Inventory levels at the end of the first six months of fiscal 2005
increased  $24.6  million,  or 25.0% from the levels  recorded at the end of the
prior year's second quarter.  The increase in inventory related primarily to the
addition  of Saucony  product.  Accounts  receivable  at June 2, 2006 were $23.0
million or 31.5% higher than the amount at the end of last year's second quarter
which was  primarily due to the addition of Saucony and higher sales in the last
month of the fiscal quarter. Days sales outstanding ("DSO"),  which measures the
length of the collection period for accounts receivable,  was 42 days at the end
of the second fiscal  quarter of 2006 which was flat when compared to the DSO of
42 days at the end of the same period last year. Accounts payable, at the end of
the second  quarter  of fiscal  2006,  increased  $17.4  million  from the level
recorded  at the end of the  prior  year's  second  quarter.  The  increase  was
primarily due to the addition of Saucony.  During the second  fiscal  quarter of
2006, the Company did not contribute to its defined benefit pension plan and, at
this time,  the Company does not plan to make any  contributions  to its defined
benefit pension plan during the remainder of the 2006 fiscal year.


<PAGE>


PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

     Additions to property and  equipment  totaled $9.4 million in the first six
months of fiscal 2006, an increase compared to the $3.9 million in the first six
months of fiscal 2005.  The increase in capital  purchases  compared to the same
period in fiscal  2005  related  primarily  to the  continued  retail  expansion
efforts  during the second  fiscal  quarter  of 2006 and the  renovation  of our
corporate  headquarters.  Funding of our capital  expenditures  was  provided by
operations and our revolving credit facility.

     At the end of the second  quarter of fiscal 2006,  there was $68.0  million
outstanding  under the Company's  $275.0 million  revolving  credit  facility of
which $200.0  million is currently  committed.  The facility was entered into in
September 2005 as part of the Saucony  acquisition and to also provide funds for
working capital and general corporate  purposes.  As of June 2, 2006, letters of
credit totaling $42.7 million were  outstanding for the purchase of inventories.
The issuance of letters of credit for  inventory  purchases  does not impact the
Company's  borrowing  capacity  under the revolving line of credit because these
letters of credit  are  supported  by other  uncommitted  lines of  credit.  All
letters of credit generally expire within one year.

     During the first six months of fiscal  2006 we  returned  $10.7  million to
shareholders through share repurchases and cash dividends. We spent $6.3 million
to repurchase  448,300 common shares under our share repurchase  program.  As of
June 2, 2006 we have  approximately  3.5 million  shares  remaining on our share
repurchase authorization.

     We do not have any relationships with unconsolidated  entities or financial
partnerships,  such as  entities  often  referred  to as  structured  finance or
special purpose  entities,  which would have been established for the purpose of
facilitating  off-balance-sheet  arrangements or other  contractually  narrow or
limited  purposes.  As such,  we are not  exposed to any  financing,  liquidity,
market or credit risk that could arise if we had engaged in such relationships.

     On June 16, 2006, the Company sold the former  Saucony,  Inc.  headquarters
facility  located in Peabody,  Massachusetts  for $7.5 million,  net of costs to
sell.



<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There  have  been no  material  changes  from  the  information  previously
reported  under  Item 7A of the  Company's  Annual  Report  on Form 10-K for the
fiscal year ended December 2, 2005.

ITEM 4.     CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

     Within the 90 days prior to the date of this  report,  the Company  carried
out an evaluation  under the  supervision of and with the  participation  of the
Company's management, including the participation of its Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the Company's  disclosure controls and procedures pursuant to Rule 13a-15 of the
Securities Exchange Act of 1934, as amended.  Based upon that evaluation,  as of
the end of the period covered by this report,  our Chief  Executive  Officer and
Chief  Financial  Officer  have  concluded  that  our  disclosure  controls  and
procedures  (as  defined in Rules  13a-15(e)  and  15d-15(e)  of the  Securities
Exchange  Act of 1934,  as amended)  are  effective  to ensure that  information
required  to be  disclosed  by the  Company in reports  that it files or submits
under the Securities Exchange Act of 1934, as amended,  is recorded,  processed,
summarized  and reported  within the time periods  specified in  Securities  and
Exchange  Commission  rules and forms.  We continue to review and  document  our
disclosure  controls and procedures and may from time to time make changes aimed
at enhancing their  effectiveness  and ensuring that our systems evolve with our
business.

(b) Changes in internal controls over financial reporting.

     There  was no change  in the  Company's  internal  control  over  financial
reporting  (as  defined  in Rules  13a-15(f)  and  15d-15(f)  of the  Securities
Exchange Act of 1934, as amended)  during our second quarter that has materially
affected,  or is reasonably  likely to materially  affect,  our internal control
over financial  reporting.  As disclosed in our Annual Report on Form 10-K filed
with the Securities and Exchange Commission,  we have included Saucony,  Inc. in
our  review  and  evaluation  of  internal  controls  and  procedures  as of the
beginning of fiscal 2006.


<PAGE>


PART II - OTHER INFORMATION
ITEM 1A. RISK FACTORS

     In addition to the other  information set forth in this report,  you should
carefully  consider the factors  discussed in Part I, "Item 1A. Risk Factors" in
our Annual Report on Form 10-K for the year ended December 2, 2005,  which could
materially affect our business, financial condition or future results. The risks
described  in our Annual  Report on Form 10-K are not the only risks  facing our
Company. Additional risks and uncertainties not currently known to us or that we
currently  deem to be  immaterial  also  may  materially  adversely  affect  our
business, financial condition and/or operating results.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

<TABLE>
      Our repurchases of equity securities for the second quarter of fiscal 2006
were as follows:
<CAPTION>
                                                            Total
                                                            Number of  Maximum
                                                            Shares     Number
                                                            Purchased  of Shares
                                        Total      Average  As Part    that May
                                        Number     Price    of         Yet Be
                                        Of         Paid     Publicly   Purchased
                                        Shares     Per      Announced  Under the
Period                                  Purchased  Share    Plan       Plan
-----------------------------------------------------------------------------------

March 4, 2006 - March 31, 2006                -        -          -   3,798,494

<S>   <C>           <C>                 <C>       <C>       <C>       <C>
April 1, 2006 - May 5, 2006             100,700   $14.19    100,700   3,697,794

May 6, 2006 - June 2, 2006              239,100   $13.89    239,100   3,458,694
</TABLE>


     In June 2004, the Board of Directors  increased the authorization  under an
existing  stock   repurchase   program  by  five  million   shares.   Under  the
authorization,  the Company can repurchase  shares in the open market or through
privately  negotiated  transactions.  The  repurchase  program  does not have an
expiration date. All shares repurchased during the period covered by this report
were purchased under a publicly announced plan.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Annual Meeting of the Company's shareholders was held on April 6, 2006.
The three  directors  nominated by the Company's Board of Directors were elected
by the vote set forth below:

                                                        Votes
                                            ------------------------------
              Name of Director              For           Withheld
              --------------------------    ------------------------------
              David M. Chamberlain          29,879,795    3,893,013
              Shira D. Goodman              30,125,650    3,647,158
              Myles J. Slosberg             28,223,884    5,548,924

     The Company's  other  directors,  whose term of office  continues after the
2006 stockholders' meeting, are as follows:

                           Christine M. Cournoyer
                           F. Lance Isham
                           Edward L. Larsen
                           James F. Orr III
                           Frank R. Mori
<PAGE>

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (continued)

     The  Company's  shareholders  also  ratified  the  Company's  selection  of
PricewaterhouseCoopers  LLP as  auditors of the Company for the 2006 fiscal year
by the vote set forth below:

                        Votes
             -----------------------------------------------
                 For           Against       Abstentions
                 ---           -------       -----------
             29,892,146       3,852,745         27,917



<PAGE>



PART II - OTHER INFORMATION (continued)

                           THE STRIDE RITE CORPORATION

ITEM 6.     EXHIBITS

Exhibit No.       Description of Exhibit

    3     (i)     Restated Articles of Organization of the Registrant with
                  amendments thereto through November 28, 1986, incorporated
                  by reference from Exhibit 4(i) to the Registrant's Form S-8
                  filed on October 25, 1996.

    3     (ii)    Articles of Amendment dated April 7, 1987 to Restated
                  Articles of Organization, incorporated by reference from
                  Exhibit 4(i) to the Registrant's Form S-8 filed on
                  October 25, 1996.

    3     (iii)   Articles of Amendment dated December 16, 1987 to Restated
                  Articles of Organization of the Registrant, incorporated by
                  reference from Exhibit 4(i) to the Registrant's Form S-8 filed
                  on October 25, 1996.

    3     (iv)    Articles of Amendment dated December 3, 1991 to the Restated
                  Articles of Organization of the Registrant, incorporated by
                  reference from Exhibit 4(i) to the Registrant's Form S-8 filed
                  on October 25, 1996.

    3     (v)     Certificate of Vote of Directors establishing a series of
                  a Class of Stock dated as of June 18, 1997.

    3     (vi)    By-laws of the Registrant, as amended. This document was
                  filed as Exhibit 3 of the Registrant's Form 10-Q for the
                  fiscal period ended June 1, 1990 and is incorporated herein by
                  reference.

    4     (i)     Reference is made to Exhibits 3(i), (ii), (iii) and (iv)
                  referred to above, which are expressly incorporated herein by
                  reference.

  31.1*           Certification of the Company's Chief Executive Officer
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

  31.2*           Certification of the Company's Chief Financial Officer
                  pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002

  32.1*           Certification of the Company's Chief Executive Officer
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

  32.2*           Certification of the Company's Chief Financial Officer
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*Filed herewith


<PAGE>



                           THE STRIDE RITE CORPORATION

                                   SIGNATURES



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned duly authorized.

                                       THE STRIDE RITE CORPORATION
                                       ---------------------------
                                      (Registrant)



Date:  July 7, 2006                    By:  /s/ Frank A. Caruso
       -------------------                  --------------------------
                                            Frank A. Caruso
                                            Chief Financial Officer