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                                                         Exhibit Index
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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 August 28, 1998

_____       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

               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)

         191 Spring Street, P. O. Box 9191 Lexington, Massachusetts 02420
                (Address of principal executive offices) (Zip Code)

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

            Securities registered pursuant to Section 12(b) of the Act:

                                                 Name of each exchange
        Title of each class                      on which registered
        Common stock, $.25 par value             New York Stock Exchange

        Preferred Stock Purchase Rights          New York Stock Exchange

         Securities registered pursuant to Section 12(g) of the Act:  None

         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  report),  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days.

                      Yes X No ____

         As of October 6, 1998,  46,427,853  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
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)
<TABLE>

<CAPTION>
                                         August 28,                  August 29,
                                            1998      November 28,      1997
                                        (Unaudited)      1997       (Unaudited)
  Assets

  Current Assets:
<S>                                      <C>            <C>            <C>
    Cash and cash equivalents            $ 22,177       $ 41,663       $  7,606

    Short-term investments                      -          9,417         44,504

    Accounts and notes receivable, net    101,796         51,708         85,893

    Inventories                           108,909        134,728        116,012

    Deferred income taxes and
      prepaid expenses                     33,247         34,135         35,633
                                         --------        -------        -------

    Total current assets                  266,129        271,651        289,648

  Property and equipment, net              56,498         55,395         54,016

  Other assets                             19,953         16,872         18,791
                                         --------       --------       --------

    Total assets                         $342,580       $343,918       $362,455
                                         ========       ========       ========

</TABLE>








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















                                     2


<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION
                CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
                             (Dollars in Thousands)
<TABLE>
<CAPTION>

                                     August 28, 1998             August 29, 1997
                                                     November 28,
                                         (Unaudited)     1997       (Unaudited)
 Liabilities and Stockholders' Equity

 Current Liabilities:
   Current maturities of
   long-term debt                                 -             -      $    833
   Short-term debt                                -             -         9,700
<S>                                        <C>           <C>             <C>
   Accounts payable                        $ 25,375      $ 31,748        20,567
   Income taxes payable                      24,384        21,445        27,069
   Accrued expenses and other
    liabilities                              29,327        42,195        46,361
                                           --------      --------      --------
   Total current liabilities                 79,086        95,388       104,530

 Deferred income taxes                        6,504         6,504         8,796


 Stockholders' Equity:
   Preferred stock, $1.00 par value
      Shares authorized - 1,000,000
      Shares issued - none                        -             -             -

   Common stock, $.25 par value
      Shares authorized - 135,000,000
      Shares issued - 56,946,544             14,237        14,237        14,237

   Capital in excess of par value            21,916        22,289        22,643

   Retained earnings                        345,973       326,292       328,263

   Less cost of 10,051,557 shares of
      common stock held in treasury
     (9,630,600 on November 28, 1997
      and 9,228,150 on August 29, 1997)    (125,136)     (120,792)     (116,014)
                                           ---------     ---------     ---------

   Total stockholders' equity               256,990       242,026       249,129
                                          ---------     ---------      --------

   Total liabilities and
      stockholders' equity                 $342,580      $343,918      $362,455
                                           ========      ========      ========
</TABLE>


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








                                     3


<PAGE>






PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
         For the periods ended August 28, 1998 and August 29, 1997
                      (In Thousands Except Per Share Data)

<TABLE>
<CAPTION>
                                  Three Months Ended        Nine Months Ended
                                  ------------------        -----------------
                               August 28,    August 29,   August 28,  August 29,
                                  1998         1997         1998          1997
                              -----------   -----------   ----------  ----------

<S>                              <C>          <C>          <C>         <C>
Net sales                        $168,516     $144,463     $440,677    $417,872
                                                                  -

Cost of sales                     105,772       90,419      279,820     266,555

Selling and
  administrative  expenses         42,973       41,632      122,151     121,996
                                   ------      ------ -     -------     -------

Operating income                   19,771       12,412       38,706      29,321

Other income(expense):
   Interest income                  1,022        1,111        2,795       2,954
   Interest expense                 (551)          (70)      (1,494)       (151)
   Other, net                          64         (561)       2,343      (1,742)
                                       --         -----       -----      -------
                                      535          480        3,644       1,061
                                      ---         -----       -----       -----

Income before income taxes         20,306       12,892       42,350      30,382

Provision for income taxes          7,540        4,706       15,587      10,999
                                    -----       -------      ------      ------

Net income                       $ 12,766     $  8,186     $ 26,763    $ 19,383
                                 ========     ======== =   ========    ========

Net income per common share:
    Diluted                      $    .27     $    .17     $    .56    $    .39
                                 ========     ======== =   ========    ========
    Basic                        $    .27     $    .17     $    .57    $    .40
                                 ========     ======== =   ========    ========

Dividends per common share       $    .05     $    .05     $    .15    $    .15
                                 ========     ======== =   ========    ========

Average common shares used in 
    per share computations:
    Diluted                        47,707       48,675       47,647      49,287
                                   ======       ======      =======      ======
    Basic                          47,261       48,220       47,275      48,863
                                   ======       ======      =======      ======
</TABLE>

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













                                   4


<PAGE>



PART I - FINANCIAL INFORMATION (Continued)
                           THE STRIDE RITE CORPORATION
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
       For the nine  months  ended  August 28, 1998 and August 29, 1997 
                            (Dollars in Thousands)

<TABLE>
                                                      August 28,    August 29,
                                                         1998           1997
                                                     ------------   ------------
Cash was provided from (used for) Operations:
<S>                                                     <C>            <C>
  Net income                                            $26,763        $19,383
  Adjustments to reconcile to net cash provided 
     from (used for)operations:
  Depreciation and amortization                           7,054          7,880
  Deferred income taxes, net                                869            477
  Compensation expense related to executive stock plans     248            443
  Equity in loss (income) of affiliate                     (925)           400
  Loss(gain)on disposals of property and equipment       (3,255)           717
  Changes in:
     Accounts and notes receivable                      (50,088)       (41,027)
     Inventories                                         25,819          3,075
     Prepaid expenses                                        17          4,706
     Accounts payable, income taxes, accrued expenses
       and other current liabilities                    (15,134)           430
                                                        --------          ---
  Net cash used for operations                           (8,632)        (3,516)
                                                        --------        -------
Investments:
  Short-term investments                                  9,417         (9,893)
  Additions to property and equipment                   (13,045)        (9,759)
  Proceeds from sales of property and equipment           8,342            259
  Purchase of noncurrent marketable securities           (1,666)        (2,464)
  Increase in other assets                                 (688)        (1,605)
                                                         -------        -------
  Net cash provided from (used for) investments           2,360        (23,462)
                                                         -------       --------
Financing:
  Proceeds from sale of stock under stock plans           1,642            536
  Cash dividends paid                                    (7,082)        (7,364)
  Repurchase of common stock                             (7,774)       (25,557)
  Short-term debt                                            -           9,700
                                                        --------       --------
  Net cash used for financing                           (13,214)       (22,685)
                                                        --------       --------
Net decrease in cash and cash equivalents               (19,486)       (49,663)
Cash and cash equivalents at beginning of period         41,663         57,269
                                                        -------        -------
Cash and cash equivalents at end of period              $22,177        $ 7,606
                                                        =======        =======
</TABLE>

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













                                     5


<PAGE>




PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                     NOTE 1

         The financial information included in this Form 10-Q of The Stride Rite
Corporation (the "Company") for the periods ended August 28, 1998 and August 29,
1997 is  unaudited  and subject to year-end  audit  adjustments.  However,  such
information   includes  all   adjustments   (including   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 nine-month  period ended August 28, 1998 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 the
Company's  audited  financial  statements,  but does not include all disclosures
required  by  generally   accepted   accounting   principles.   For   additional
information,  reference is made to the Company's  financial  statements (and the
notes  thereto)  included in the  Company's  Form 10-K for the fiscal year ended
November  28,  1997.  Certain  reclassifications  have  been  made  to the  1997
condensed  consolidated  financial  statements  to conform  to the  fiscal  1998
presentation.

                                NOTE 2

         During the first nine months of fiscal 1998, interest payments amounted
to $1,264,000  ($140,000 in 1997).  For the first nine months of 1998,  payments
for income taxes totaled $11,778,000 ($2,283,000 in 1997).

                                NOTE 3

         Earnings per share information has been restated to conform to SFAS No.
128,  "Earnings per Share" which was adopted in the first  quarter  1998.  Basic
earnings per common share is  calculated  by dividing net income by the weighted
average number of common shares outstanding during the period.  Diluted earnings
per share is  calculated  by  dividing  net  income  by the sum of the  weighted
average  number of shares  plus  additional  common  shares that would have been
outstanding  if  potential  dilutive  common  shares  had been  issued for stock
options  granted.  The following  table  reconciles the number of shares for the
basic and dilutive  computations  for the third  quarter and nine month  periods
ended August 28, 1998 and August 29, 1997.

<TABLE>
<CAPTION>
                              Third Quarter                  First Nine Months
                     --------------------------------- -------------------------
                                  Aug. 28,    Aug. 29,     Aug. 28,     Aug. 29,
                                   1998        1997         1998         1997

<S>                                <C>         <C>         <C>          <C>
Net income                         $12,766     $8,186      $26,763      $19,383


Earnings per common share:
  Basic                            $   .27     $  .17      $   .57      $   .40
  Diluted                              .27        .17          .56          .39

Weighted average common shares
  outstanding (basic)               47,261     48,220       47,275       48,863
Dilutive effect of stock options       446        455          372          424
                                    ------     ------       ------       ------
Weighted average common shares
  outstanding (diluted)             47,707     48,675       47,647       49,287
                                    ======     ======       ======       ======
</TABLE>

                                6

<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                             NOTE 3 - continued...

Earnings  per share  information,  restated to conform to SFAS No. 128,  for the
three years ended November 28, 1997, is as follows:

                                         1997          1996         1995
                                     -----------   -----------   -------------
Basic net income per share               $.41          $.05        $(.17)
Diluted net income per share              .40          .05          (.17)

                                NOTE 4

         On March 31, 1998, the Company sold two buildings and adjoining land in
Boston  which was  formerly  used as a  distribution  center  for the  Company's
wholly-owned subsidiary,  Stride Rite Children's Group, Inc. The Boston facility
was closed in  December  1997  following  the  transfer of  operations  to a new
distribution  center in  Huntington,  Indiana.  The  transaction  resulted  in a
one-time  pre-tax gain of $3.8 million ($.05 per share,  net of income taxes) in
the second quarter of fiscal 1998.

                               NOTE 5

         On  October  9,  1998,  the  Company  announced  that it was ending its
efforts to market a line of  footwear  under the  "Levi's"  brand.  The  Company
entered  into the license  agreement  with Levi  Strauss & Co. in April 1997 and
shipped its first  products to  retailers  in July 1998.  The Company has agreed
with Levi Strauss & Co. to end the license agreement after the Fall 1998 season.
In the fourth  quarter of fiscal  1998,  the  Company  will  record a  one-time,
pre-tax,  charge of approximately $5 million ($.07 per share) to cover estimated
losses on the  disposal  of  footwear  inventory  bearing  the Levi's  brand and
severance costs associated with this decision.





















                                  7


<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                      THE STRIDE RITE CORPORATION

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

         Certain  statements  contained  in  this  Item  2 are  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995 and are thus  prospective.  The words  "expect",  "estimate",  and other
similar  expressions  which do not relate solely to historical  matters identify
forward-looking  statements.  Such  forward-looking  statements  are  subject to
risks,  uncertainties  and other  factors  which could cause  actual  results to
differ  materially from future resutls  expressed,  projected or implied by such
forward-looking statements.  Readers are referred to Exhibit 99 to the Company's
Quarterly  Report on Form 10-Q for the fiscal  period  ended March 1, 1996 for a
discussion of certain such  factors.  The Company  disclaims  any  obligation to
update such forward-looking statements.

Results of Operations

         The following table summarizes the Company's  performance for the third
quarter  and first nine months of fiscal 1998 as compared to the results for the
same periods in fiscal 1997:

Increase (Decrease) Percent vs. 1997 Results:

<TABLE>
<CAPTION>
                                             Third Quarter      Nine Months

<S>                                              <C>                <C>
Net sales                                        16.6%              5.5%
Gross profit                                     16.1%              6.3%
Selling and administrative expenses               3.2%              0.1%
Operating income                                 59.3%              32.0%
Income before income taxes                       57.5%              39.4%
Net income                                       55.9%              38.1%
</TABLE>

Operating Ratios as a Percentage to Net Sales:

<TABLE>
<CAPTION>
                                        Third Quarter           Nine Months
                                      1998          1997       1998     1997

<S>                                      <C>        <C>        <C>      <C>
Gross profit                             37.2%      37.4%      36.5%    36.2%
Selling and administrative expenses      25.5%      28.8%      27.7%    29.2%
Operating income                         11.7%       8.6%       8.8%     7.0%
Income before income taxes               12.1%       8.9%       9.6%     7.3%
Net income                                7.6%       5.7%       6.1%     4.6%
</TABLE>










                                      8


<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

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

Net Sales

       Net sales in the third quarter of fiscal 1998 increased  $24.1 million or
16.6% over the net sales level for the same period of fiscal 1997. For the first
nine months of fiscal 1998, consolidated net sales were above the same period of
fiscal 1997 by $22.8  million or 5.5%.  Revenues  from the  Company's  wholesale
division  increased  5.8% during the first nine months of fiscal 1998, and sales
of the Company's retail division  increased 3.3% during the same period over the
comparable period in fiscal 1997. In the third quarter of fiscal 1998, wholesale
division revenues  increased 19.3% and retail sales increased 2.9% from the same
period in fiscal 1997.  With respect to the  wholesale  division of the Company,
unit shipments of current line merchandise  during the first nine months of 1998
were 4.5%  above the  comparable  period in fiscal  1997.  During the first nine
months of fiscal 1998 sales of  discontinued  products  were 64% higher than the
comparable  period in fiscal 1997 with much of the  increase due to the disposal
of Tommy Hilfiger  inventory.  Excluding the impact of product mix changes,  net
sales in the first nine months of fiscal  1998 was  decreased  by  approximately
$4.6 million due to selling price deflation.

       In the  third  quarter  of  fiscal  1998,  Keds,  the  Company's  largest
division,  accounted for a significant  portion of the increased revenues in the
Company's wholesale businesses. Keds division sales in the third quarter of 1998
increased 49% from 1997.  Sales of Keds' new "basics"  offerings,  including the
Ready to Wear and Relaxed Fit collections, more than offset the continuing sales
decline  of the  Champion  style.  For the first  nine  months,  Keds' net sales
increased  16%  compared  to 1997,  with the sales of current  line  merchandise
higher by 19% and sales of discontinued  styles down 38% from the same period of
1997.

       The Stride  Rite  Children's  Group  achieved a 6% sales  increase in the
third  quarter  of fiscal  1998  with a 3%  increase  in  retail  sales and a 8%
increase in sales to  independent  accounts  for the same period in fiscal 1997.
The Children's Group sales in the third quarter of 1998 included $1.6 million in
revenue  related to the initial  shipments of the Nine West Kids  product  line.
During  the third  quarter of 1998,  sales at  comparable  company-owned  retail
stores increased 3.6% from 1997. For the first nine months of fiscal 1998, sales
of the Stride Rite  Children's  Group increased 4% from the same period in 1997,
with  sales to  independent  accounts  up 5% and sales at  company-owned  retail
stores up 3% from the 1997  period.  Sales at  comparable  company-owned  retail
stores  increased  5.7% during the first nine months of 1998.  At the end of the
third quarter of fiscal 1998, the Company operated 198 stores,  down 3% from the
204 stores open at the end of the third quarter in fiscal 1997.





                                   9

<PAGE>




PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

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

       Sales of Tommy  Hilfiger  products in the third quarter of 1998 decreased
6% as  compared  to the same  period in 1997.  The launch of the Tommy  Hilfiger
women's  product line  partially  offset a 45% sales  decline in the Tommy men's
business.  Sales  of the  Tommy  Hilfiger  men's  product  line  continue  to be
adversely  affected by the difficult market conditions for athletic footwear and
the brand's disappointing results in the Fall 1997 selling season. Sales for the
first nine months of fiscal 1998 for the Tommy Hilfiger division decreased 1% as
compared  to the same  period  in 1997 as  revenues  associated  with the  Tommy
Hilfiger women's launch and the liquidation of discontinued  men's styles offset
a 37%  decrease  in the sales of current  line  merchandise  for the Tommy men's
business.  While the comparison to 1997 was difficult, as sales in 1997 included
heavy  shipments to retailers  to support the initial  launch of the brand,  the
slowdown in the overall athletic market, particularly men's, continued to have a
negative effect on Tommy Hilfiger division sales in 1998. Additionally,  product
line  changes away from higher  priced  basketball  styles and more  competitive
market  conditions  resulted in an average  selling  price in 1998 which was 23%
lower than the first nine months of 1997.

         Compared  to the same  period  in  fiscal  1997,  sales  of the  Sperry
Top-Sider  division  increased 6% in the third quarter of fiscal 1998.  However,
Sperry  sales  declined 9% for the first nine months of fiscal 1998 as the brand
experienced  heavy  cancellations  of future  orders  and soft  reorders  due to
increased  competition in the men's boat shoe market during the Spring season of
1998.  International  revenues  in the  third  quarter  of 1998  were  below the
comparable  period of 1997 by $1.9  million or 19%,  which was  principally  the
result  of a  restructuring  of  the  Company's  international  operations  that
converted distribution  arrangements to license agreements in certain countries.
For the first nine months of 1998,  International revenues declined $5.6 million
or 18% from the comparable period of fiscal 1997.

         During the third  quarter of fiscal  1998 the  Company  began  shipping
Levi's men's and boys'  products  under a license  agreement with Levi Strauss &
Co.  Sales of Levi's  footwear  for the third  quarter of 1998 were $4  million,
significantly  below the Company's  expectations.  After  evaluating the initial
retail  results and assessing  the general  strength of the Levi's brand and the
current  competitive  conditions in the young men's footwear market, the Company
and Levi Strauss & Co. mutually agreed to discontinue its line of footwear under
the Levi's brand after the Fall 1998 season. The Company will record a one-time,
pre-tax  charge of  approximately  $5  million  ($.07 per  share) in the  fourth
quarter of fiscal 1998 to cover  estimated  losses on the  disposal of inventory
and severance costs associated with this decision.









                                     10


<PAGE>



PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

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

Gross Profit

       During the first nine months of fiscal 1998,  gross profit increased $9.5
million,  a gain of 6.3% compared to the net sales increase of 5.5% for the same
period.  The consolidated gross profit percent for the first nine months of 1998
increased 0.3 percentage points, finishing at 36.5% in 1998 compared to 36.2% in
1997.  The gross profit  performance  in the third  quarter of 1998 was slightly
lower than the same period in fiscal  1997,  37.2% in 1998  compared to 37.4% in
the 1997 third quarter.  The Company's LIFO provision had a favorable  impact on
gross profit comparisons for the first nine months of 1998, with LIFO increasing
gross  profit  by $2.7  million  (0.6% of net  sales) in 1998  compared  to $1.4
million (0.3% of net sales) in 1997.  The primary  reason for the favorable LIFO
impact was the reduction of certain manufactured inventory quantities which were
valued at costs prevailing in prior years. Gross profit performance in the first
nine months of 1998 was impacted negatively by increased inventory  obsolescence
charges and sales allowances,  particularly in the Tommy Hilfiger division,  and
higher retail  markdowns.  The Company's nine month gross profit  performance in
1998 was also  negatively  affected by $1.7 million in start-up costs related to
new licensed  product lines, all of which began shipping in the third quarter of
this year.

       In the third quarter,  the LIFO provision had a favorable impact on gross
profit  comparisons,  with LIFO increasing gross profit by $1.2 million (0.7% of
net sales) in 1998  compared to an increase of $1.3 million  (0.9% of net sales)
in 1997.  The favorable  sales results at Keds,  which has a higher gross profit
rate than the Company's other wholesale businesses, in the third quarter of 1998
helped the Company's overall gross profit  performance in the period.  The gross
profit percent in the third quarter of 1998 was reduced by 0.9 percentage points
due to the accrual of sales allowances related to the Levi's product line.

Operating Costs

       Selling  and  administrative  expenses in the first nine months of fiscal
1998 were flat with the comparable period of the prior year, despite the overall
increase  in net sales of 5.5%  during  the same  period.  Operating  costs as a
percentage of sales  decreased  from last year by 1.5  percentage  points in the
first nine months (27.7% in 1998 compared to 29.2% in 1997).  The operating cost
comparison  between the 1998 and 1997 third quarter  periods was also favorable,
as expenses  increased by only 3.2% compared to the sales gain of 16.6%.  In the
third quarter of 1998, the relationship of selling and  administrative  expenses
to net sales  declined by 3.3  percentage  points as compared to the  comparable
period of 1997.  Operating  costs in the first nine  months of 1998  included $3
million  of product  development  and other  selling  and  administrative  costs
related to the launch of the Levi's,  Tommy Hilfiger  women's and Nine West Kids
product lines which began shipping in the third quarter of 1998.



                                  11


<PAGE>




PART I - FINANCIAL INFORMATION (Continued)

                       THE STRIDE RITE CORPORATION

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

       Advertising  costs  increased  by $4.2  million  or 18% in the first nine
months of fiscal 1998,  principally related to the Keds 1998 national television
campaign  supporting  the  introduction  of the  Ready to Wear and  Relaxed  Fit
collections.  As a percentage of net sales, advertising expense represented 6.3%
of sales in the first nine months of 1998,  which was higher  than the  spending
rate of 5.7% of  sales  in the  comparable  period  in  1997.  Offsetting  these
spending  increases was a $3.1 million decrease in distribution  expenses due to
efficiencies at the Company's Kentucky  distribution  center and the lower costs
of the new Huntington,  Indiana  facility which commenced  operations in October
1997.  Expenses  in the 1997 nine month  period  had  included  $1.4  million of
start-up costs related to the new  Huntington,  Indiana  facility.  Distribution
expenses represented 1.8% of net sales in the first nine months of 1998 compared
to 2.6% in 1997. In addition,  the elimination of certain International division
overhead  costs  of  $2.3  million  and  various  other  administrative  expense
decreases  contributed to the overall reduction in operating  expenses in fiscal
1998.

Other Income and Taxes

       Other income  (expense)  increased  pre-tax income by $3.6 million in the
first nine months of fiscal 1998  compared to an increase of $1.1 million in the
comparable period of 1997. In the first nine months of fiscal 1998, other income
included a pre-tax  gain of $3.8 million from the March 1998 sale of real estate
formerly  used  as  a  distribution   center  for  the  Company's   wholly-owned
subsidiary,  Stride Rite  Children's  Group,  Inc. (See Note 4 above).  Interest
income in 1998  decreased  $0.2 million for the first nine months of 1998 versus
the comparable period in 1997. Interest expense in the first nine months of 1998
increased  to $1.5  million  compared  to $0.2  million in 1997,  as the Company
maintained higher borrowings than in 1997 due to increased  inventory levels and
cash  expenditures  related to the Company's share repurchase  program.  Average
short-term  borrowings in the first nine months of 1998 were $30.8  million,  up
from the average borrowings of $1.7 million in the comparable period of 1997.

       The provision for income taxes  increased  $4.6 million in the first nine
months of fiscal 1998 as compared to the similar period in fiscal 1997 primarily
due to the higher pre-tax  income earned in the 1998 period.  The 1998 effective
income tax rate was also higher, 36.8% compared to 36.2% in 1997, due to reduced
tax savings related to a company-owned life insurance program.








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PART I - FINANCIAL INFORMATION (Continued)

                           THE STRIDE RITE CORPORATION

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

Net Income

       Net  income  for the first  nine  months of fiscal  1998  increased  $7.4
million,  up 38% from the income earned in the comparable period of fiscal 1997.
The  higher net income was the  result of  increased  net sales  improved  gross
profit  performance  and the  one-time  gain from the sale of real  estate.  The
Company's  after-tax return on net sales in the first nine months of fiscal 1998
improved by 1.5  percentage  points  (6.1% of sales in 1998  compared to 4.6% in
1997).

Liquidity and Capital Resources

       At August 28, 1998, the Company's  balance sheet reflects a current ratio
of  3.4  to 1  with  no  long-term  debt.  The  Company's  cash  and  short-term
investments  totaled $22.2 million at the end of the latest  quarter,  below the
cash and  investments  total of $52.1 million at the end of the third quarter of
fiscal 1997. This lower cash and short-term  investment  balance was principally
the result of cash used in the company's stock repurchase  program and increased
working  capital  needs.  In 1998,  other assets also included  $10.8 million of
investments  in  intermediate-term,  fixed income  instruments  compared to $9.6
million in similar  investments  at the end of third  quarter  1997.  During the
first nine months of 1998, the Company's  operations  used $8.6 million of cash,
compared to the $3.5 million of operating cash used in the comparable  period in
1997.

       At August 28,  1998,  receivable  and  inventory  levels  totaled  $210.7
million,  an  increase  of $8.8  million or 4.4% from the $201.9  million  asset
amount at the end of the first nine months of fiscal 1997.  Accounts  receivable
of $101.8 million at the end of the third quarter of 1998  increased  18.5% from
the 1997 amount,  slightly  above the sales  increase of 16.6% in the quarter as
shipments were heavier than last year in the August timeframe.  Inventories were
lower at the end of the first  nine  months of 1998,  down $7.1  million or 6.1%
from the 1997 level, as additional  inventory associated with the Tommy Hilfiger
women's  and Levi's  product  lines were more than  offset by reduced  inventory
balances in the other divisions.













                                       13


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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 $13 million in the first
nine months of fiscal 1998  compared  to $9.8  million in the same 1997  period.
Capital  expenditures  in the first nine months of 1998  included a $3.2 million
expenditure  related  to  the  Company's  purchase  of its  Huntington,  Indiana
distribution  facility.  A large portion of the Company's  capital  expenditures
over the next two years will be related to upgrading its information  systems in
order to prepare for the Year 2000  transition.  During fiscal 1997, the Company
formulated a plan to implement  system changes designed to handle the transition
in the  Company's  systems.  In most areas,  the Company  plans to implement new
computer systems,  which will be Year 2000 compliant,  as part of its continuing
efforts to  upgrade  systems  capabilities  and to effect  the  transition  from
mainframe computer processing to lower cost,  midrange computers.  As previously
disclosed,  the Company  expects to spend  approximately  $15 million in capital
expenditures  during the 1997 to 1999  period as part of this  effort to upgrade
system capabilities and to deal with the Year 2000 transition. As a further step
to minimize business  interruptions  related to the Year 2000 issue, the Company
is in the  process of  executing  a plan to  remediate  certain  elements of its
existing business software. The Company anticipates that the installation of its
new information systems and remediation of its remaining  information systems in
order to make them Year 2000  compliant will be  substantially  completed by the
first half of 1999. The cost of this remediation effort, which is expected to be
approximately $1 million,  will be charged to expense as the costs are incurred.
Operating expenses in the first nine months of fiscal 1998 included $0.4 million
related to the remediation of these systems.

         During the first nine months of fiscal  1998,  the Company  repurchased
695,000 shares of stock for an aggregate  cost of $7.8 million.  This brings the
cumulative number of shares repurchased under the authorization  approved by the
Company's  Board of  Directors  in October  1997 to  1,220,000  shares,  leaving
780,000 shares as of August 28, 1998  authorized for future  repurchases.  Since
the end of the third  quarter,  the Company  repurchased  an additional  488,000
shares for an aggregate cost of $4.3 million further  reducing to 292,000 shares
available for repurchase under the current authorization.

         The Company uses bank lines of credit to fund seasonal  working capital
needs.  There were no borrowings  outstanding under these arrangements at August
28, 1998 and $9.7 million outstanding at August 29, 1997.













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Part II - OTHER INFORMATION

                      THE STRIDE RITE CORPORATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

             (a)     Exhibits                Description of Exhibit
                          Exhibit No.
                             10(i)           Amendment to Employment Agreement
                             11              Computation of Per Share Earnings
                             27              Financial Data Schedule

             (b)     Reports on Form 8-K
                     The Company  did not file any  current  reports on Form 8-K
                     during the most recent quarterly period.

































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<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:  October 9, 1998                  By:      /s/ John M. Kelliher
                                                 --------------------
                                                 John M. Kelliher
                                                 Chief Financial Officer








































                                       16


<PAGE>


                    THE STRIDE RITE CORPORATION


                         INDEX TO EXHIBITS



Exhibit No.

                                                        Sequential Page No.
      10(i)    Amendment to Employment Agreement          Page 18 of 25

       11      Computation of Per Share Earnings          Page 24 of 25

       27      Financial Data Schedule                        Page 25









































                                   17



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