##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended November 3, 2007
 o
    
    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: 000-50563
 BAKERS FOOTWEAR GROUP, INC.
 (Exact name of registrant as specified in its charter)
 Missouri
    
    43-0577980(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)2815 Scott Avenue,St. Louis, Missouri
    
    63103(Address of principal executive offices)
    
    (Zip Code)
 (314) 621-0699  (Registrants telephone number, including area code)
 Not Applicable  (Former name, former address and former fiscal year, if changed since last report)
 þ o
  o o þ
 o þ




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##### 



BAKERS FOOTWEAR GROUP, INC.
INDEX TO FORM 10-Q
 PagePart I Financial InformationItem 1. Financial Statements (Unaudited)Condensed Balance Sheets
    
    
    3Condensed Statements of Operations
    
    
    4Condensed Statement of Shareholders Equity
    
    
    5Condensed Statements of Cash Flows
    
    
    6Notes to Condensed Financial Statements
    
    
    7-11Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12-21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22Part II Other InformationItem 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 6. Exhibits
    
    
    22Signatures
    
    
    23Exhibit Index
    
    
    24302 Certification by Chief Executive Officer302 Certification by Chief Financial Officer906 Certification by Chief Executive Officer906 Certification by Chief Financial Officer
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED BALANCE SHEETS
 October 28,
    
    
    February 3,
    
    
    November 3,2006
    
    
    2007
    
    
    2007(Unaudited)
    
    
    
    
    
    
    (Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    180,341
    
    
    $
    407,346
    
    
    $
    247,518Accounts receivable
    
    
    1,622,942
    
    
    
    1,352,936
    
    
    
    1,307,162Other receivables
    
    
    1,523,585
    
    
    
    1,140,168
    
    
    
    249,923Inventories
    
    
    27,499,098
    
    
    
    24,102,006
    
    
    
    21,634,947Prepaid expenses and other current assets
    
    
    768,816
    
    
    
    713,810
    
    
    
    1,033,448Prepaid income taxes
    
    
    2,106,998
    
    
    
    1,129,637
    
    
    
    2,160,169Deferred income taxes
    
    
    1,900,252
    
    
    
    1,963,670
    
    
    
    Total current assets
    
    
    35,602,032
    
    
    
    30,809,573
    
    
    
    26,633,167Property and equipment, net
    
    
    50,192,784
    
    
    
    51,021,077
    
    
    
    45,386,007Deferred income taxes
    
    
    404,918
    
    
    
    424,139
    
    
    
    Other assets
    
    
    919,255
    
    
    
    904,070
    
    
    
    1,191,508Total assets
    
    $
    87,118,989
    
    
    $
    83,158,859
    
    
    $
    73,210,682Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    7,125,245
    
    
    $
    8,134,642
    
    
    $
    10,288,561Accrued expenses
    
    
    9,262,779
    
    
    
    9,004,436
    
    
    
    9,138,948Sales tax payable
    
    
    658,173
    
    
    
    757,868
    
    
    
    571,274Deferred income
    
    
    1,197,382
    
    
    
    1,332,473
    
    
    
    1,203,143Revolving credit facility
    
    
    19,806,713
    
    
    
    13,099,304
    
    
    
    21,186,579Current maturities of capital lease obligations
    
    
    232,854
    
    
    
    189,807
    
    
    
    94,149Total current liabilities
    
    
    38,283,146
    
    
    
    32,518,530
    
    
    
    42,482,654Subordinated convertible debentures
    
    
    
    
    
    
    
    
    
    
    4,000,000Obligations under capital leases, less current maturities
    
    
    94,149
    
    
    
    57,863
    
    
    
    Accrued rent liabilities
    
    
    9,042,805
    
    
    
    9,415,617
    
    
    
    10,213,248Shareholders equity:Preferred stock, $0.0001 par value, 5,000,000 shares
authorized, no shares outstanding
    
    
    
    
    
    
    
    
    
    
    Common Stock, $0.0001 par value; 40,000,000 shares
authorized, 6,493,035 shares outstanding at October
28, 2006 and February 3, 2007, and 6,655,856 shares
outstanding at November 3, 2007
    
    
    649
    
    
    
    649
    
    
    
    665Additional paid-in capital
    
    
    36,520,249
    
    
    
    36,571,423
    
    
    
    36,923,876Retained earnings (accumulated deficit)
    
    
    3,177,991
    
    
    
    4,594,777
    
    
    
    (20,409,761
    )Total shareholders equity
    
    
    39,698,889
    
    
    
    41,166,849
    
    
    
    16,514,780Total liabilities and shareholders equity
    
    $
    87,118,989
    
    
    $
    83,158,859
    
    
    $
    73,210,682
  3




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS
 (Unaudited)
 Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedOctober 28, 2006
    
    
    November 3, 2007
    
    
    October 28, 2006
    
    
    November 3, 2007Net sales
    
    $
    46,552,522
    
    
    $
    40,293,957
    
    
    $
    143,542,305
    
    
    $
    131,534,432Cost of merchandise sold, occupancy, and buying expenses
    
    
    34,429,758
    
    
    
    36,784,976
    
    
    
    101,611,074
    
    
    
    103,461,316Gross profit
    
    
    12,122,764
    
    
    
    3,508,981
    
    
    
    41,931,231
    
    
    
    28,073,116Operating expenses:Selling
    
    
    10,979,829
    
    
    
    11,228,162
    
    
    
    32,053,596
    
    
    
    34,333,266General and administrative
    
    
    4,987,209
    
    
    
    4,753,149
    
    
    
    13,884,013
    
    
    
    13,703,711Loss on disposal of property and equipment
    
    
    115,402
    
    
    
    18,205
    
    
    
    243,505
    
    
    
    62,957Impairment of long-lived assets
    
    
    
    
    
    
    2,375,497
    
    
    
    
    
    
    
    3,131,169Operating loss
    
    
    (3,959,676
    )
    
    
    (14,866,032
    )
    
    
    (4,249,883
    )
    
    
    (23,157,987
    )Other income (expense):Interest expense
    
    
    (319,893
    )
    
    
    (499,430
    )
    
    
    (616,785
    )
    
    
    (1,263,848
    )Other, net
    
    
    67,560
    
    
    
    70,880
    
    
    
    101,341
    
    
    
    108,664Loss before income taxes
    
    
    (4,212,009
    )
    
    
    (15,294,582
    )
    
    
    (4,765,327
    )
    
    
    (24,313,171
    )Provision for (benefit from) income taxes
    
    
    (1,610,255
    )
    
    
    
    
    
    
    (1,805,430
    )
    
    
    691,367Net loss
    
    $
    (2,601,754
    )
    
    $
    (15,294,582
    )
    
    $
    (2,959,897
    )
    
    $
    (25,004,538
    )Basic loss per share
    
    $
    (0.40
    )
    
    $
    (2.35
    )
    
    $
    (0.46
    )
    
    $
    (3.85
    )Diluted loss per share
    
    $
    (0.40
    )
    
    $
    (2.35
    )
    
    $
    (0.46
    )
    
    $
    (3.85
    )
  4




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BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENT OF SHAREHOLDERS EQUITY
 (Unaudited)
 Common StockRetainedShares
    
    
    
    
    
    
    Additional
    
    
    EarningsIssued and
    
    
    
    
    
    
    Paid-In
    
    
    (AccumulatedOutstanding
    
    
    Amount
    
    
    Capital
    
    
    Deficit)
    
    
    TotalBalance at February 3, 2007
    
    
    6,493,035
    
    
    $
    649
    
    
    $
    36,571,423
    
    
    $
    4,594,777
    
    
    $
    41,166,849Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    351,524
    
    
    
    
    
    
    
    351,524Shares issued in connection
with exercise of stock options
    
    
    93,821
    
    
    
    9
    
    
    
    929
    
    
    
    
    
    
    
    938Issuance of restricted stock
    
    
    69,000
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,004,538
    )
    
    
    (25,004,538
    )Balance at November 3, 2007
    
    
    6,655,856
    
    
    $
    665
    
    
    $
    36,923,876
    
    
    $
    (20,409,761
    )
    
    $
    16,514,780
  5




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks EndedOctober 28, 2006
    
    
    November 3, 2007Operating activitiesNet loss
    
    $
    (2,959,897
    )
    
    $
    (25,004,538
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    5,479,438
    
    
    
    6,483,620Deferred income taxes
    
    
    (673,117
    )
    
    
    2,387,809Stock-based compensation expense
    
    
    693,248
    
    
    
    351,524Excess income tax benefit from exercise of stock options
    
    
    (614,542
    )
    
    
    Loss on disposal of property and equipment
    
    
    243,505
    
    
    
    62,957Impairment of long-lived assets
    
    
    
    
    
    
    3,131,169Changes in operating assets and liabilities:Accounts receivable
    
    
    (775,547
    )
    
    
    936,019Inventories
    
    
    (1,501,239
    )
    
    
    2,467,059Prepaid expenses and other current assets
    
    
    482,765
    
    
    
    (319,638
    )Prepaid income taxes
    
    
    (2,106,998
    )
    
    
    (1,030,532
    )Other assets
    
    
    (232,420
    )
    
    
    76,617Accounts payable
    
    
    (4,934,489
    )
    
    
    2,153,919Accrued expenses and deferred income
    
    
    (2,736,985
    )
    
    
    (181,412
    )Accrued income taxes
    
    
    (683,422
    )
    
    
    Accrued rent liabilities
    
    
    2,715,180
    
    
    
    797,631Net cash used in operating activities
    
    
    (7,604,520
    )
    
    
    (7,687,796
    )Investing activitiesPurchase of property and equipment
    
    
    (17,341,330
    )
    
    
    (4,005,286
    )Proceeds from sale of property and equipment
    
    
    126,965
    
    
    
    19,803Net cash used in investing activities
    
    
    (17,214,365
    )
    
    
    (3,985,483
    )Financing activitiesNet advances under revolving credit facility
    
    
    19,806,713
    
    
    
    8,087,275Proceeds from issuance of subordinated convertible debentures
    
    
    
    
    
    
    4,000,000Debt issuance costs
    
    
    
    
    
    
    (421,248
    )Proceeds from exercise of stock warrants
    
    
    508,990
    
    
    
    Proceeds from exercise of stock options
    
    
    451,422
    
    
    
    938Proceeds from issuance of restricted stock
    
    
    
    
    
    
    7Excess income tax benefit from exercise of stock options
    
    
    614,542
    
    
    
    Principal payments under capital lease obligations
    
    
    (307,411
    )
    
    
    (153,521
    )Net cash provided by financing activities
    
    
    21,074,256
    
    
    
    11,513,451Net decrease in cash and cash equivalents
    
    
    (3,744,629
    )
    
    
    (159,828
    )Cash and cash equivalents at beginning of period
    
    
    3,924,970
    
    
    
    407,346Cash and cash equivalents at end of period
    
    $
    180,341
    
    
    $
    247,518Supplemental disclosures of cash flow informationCash paid for income taxes
    
    $
    1,643,607
    
    
    $
    73,761Cash paid for interest
    
    $
    514,230
    
    
    $
    1,055,772
  6




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 Unaudited
 1. Basis of Presentation
  2. Recent Accounting Pronouncements
   3. Income Taxes
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Accounting for Income Taxes
 7




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Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedOctober 28, 2006
    
    
    November 3, 2007
    
    
    October 28, 2006
    
    
    November 3, 2007Current:Federal
    
    $
    (1,007,570
    )
    
    $
    (3,771,429
    )
    
    $
    (921,040
    )
    
    $
    (5,602,998
    )State and local
    
    
    (226,168
    )
    
    
    (828,160
    )
    
    
    (211,273
    )
    
    
    (693,033
    )Total current
    
    
    (1,233,738
    )
    
    
    (4,599,589
    )
    
    
    (1,132,313
    )
    
    
    (6,296,031
    )Deferred:Federal
    
    
    (318,591
    )
    
    
    (1,075,041
    )
    
    
    (569,561
    )
    
    
    (2,092,623
    )State and local
    
    
    (57,926
    )
    
    
    (195,462
    )
    
    
    (103,556
    )
    
    
    (932,358
    )Total deferred
    
    
    (376,517
    )
    
    
    (1,270,503
    )
    
    
    (673,117
    )
    
    
    (3,024,981
    )Valuation allowance
    
    
    
    
    
    
    5,870,092
    
    
    
    
    
    
    
    10,012,379Total income tax expense (benefit)
    
    $
    (1,610,255
    )
    
    $
    
    
    
    $
    (1,805,430
    )
    
    $
    691,367
  Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedOctober 28, 2006
    
    

November 3, 2007
    
    

October 28, 2006
    
    
    November 3, 2007Federal income tax at statutory rate
    
    $
    (1,474,204
    )
    
    $
    (5,353,104
    )
    
    $
    (1,667,865
    )
    
    $
    (8,509,610
    )Impact of graduated Federal rates
    
    
    42,537
    
    
    
    152,946
    
    
    
    47,653
    
    
    
    243,132State and local taxes, net of federal income taxes
    
    
    (188,642
    )
    
    
    (676,339
    )
    
    
    (210,774
    )
    
    
    (1,075,170
    )Permanent differences
    
    
    10,054
    
    
    
    6,405
    
    
    
    25,556
    
    
    
    20,636Valuation allowance
    
    
    
    
    
    
    5,870,092
    
    
    
    
    
    
    
    10,012,379Total income tax expense (benefit)
    
    $
    (1,610,255
    )
    
    $
    
    
    
    $
    (1,805,430
    )
    
    $
    691,367
  8




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##### Table of Contents



October 28, 2006
    
    
    February 3, 2007
    
    
    November 3, 2007Deferred tax assets:Net operating loss carryforward
    
    $
    
    
    
    $
    
    
    
    $
    5,743,647Vacation accrual
    
    
    422,444
    
    
    
    426,763
    
    
    
    425,861Inventory
    
    
    1,641,356
    
    
    
    1,712,111
    
    
    
    1,690,716Stock-based compensation
    
    
    423,882
    
    
    
    443,840
    
    
    
    580,935Accrued rent
    
    
    3,448,694
    
    
    
    3,646,741
    
    
    
    3,983,167Valuation allowance
    
    
    
    
    
    
    
    
    
    
    (10,012,379
    )Total deferred tax assets
    
    
    5,936,376
    
    
    
    6,229,455
    
    
    
    2,411,947Deferred tax liabilities:Prepaid expenses
    
    
    163,548
    
    
    
    175,204
    
    
    
    173,620Property and equipment
    
    
    3,467,658
    
    
    
    3,666,442
    
    
    
    2,238,327Total deferred tax liabilities
    
    
    3,631,206
    
    
    
    3,841,646
    
    
    
    2,411,947Net deferred tax assets
    
    $
    2,305,170
    
    
    $
    2,387,809
    
    
    $
    
 4. Stock-Based Compensation
  Thirty-nine
    
    Thirty-nineWeeks Ended
    
    Weeks EndedOctober 28, 2006
    
    November 3, 2007Options granted
    
    
    91,728
    
    
    
    272,613Weighted-average fair value of options granted
    
    $
    10.48
    
    
    $
    3.59AssumptionsDividends
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    4.75% - 5.0
    %
    
    
    4.25%-4.5
    %Expected volatility
    
    
    50% - 55
    %
    
    
    43% - 46
    %Expected option life
    
    5  6 years
    
    5  6 years
    9




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##### Table of Contents



5. Earnings (Loss) Per Share
   Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks
    
    
    Weeks
    
    
    Weeks
    
    
    WeeksEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedOctober 28, 2006
    
    
    November 3, 2007
    
    
    October 28, 2006
    
    
    November 3, 2007Numerator:Numerator for basic earnings per share  Net income (loss)
    
    $
    (2,601,754
    )
    
    $
    (15,294,582
    )
    
    $
    (2,959,897
    )
    
    $
    (25,004,538
    )Numerator for diluted earnings per share
    
    $
    (2,601,754
    )
    
    $
    (15,294,582
    )
    
    $
    (2,959,897
    )
    
    $
    (25,004,538
    )Denominator for basic earnings per share  weighted
average shares
    
    
    6,492,969
    
    
    
    6,498,190
    
    
    
    6,439,345
    
    
    
    6,494,753Effect of dilutive securitiesStock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock purchase warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted earnings per share  adjusted
weighted average shares and assumed conversions
    
    
    6,492,969
    
    
    
    6,498,190
    
    
    
    6,439,345
    
    
    
    6,494,753
  Thirteen
    
    Thirteen
    
    Thirty-nine
    
    Thirty-nineWeeks
    
    Weeks
    
    Weeks
    
    WeeksEnded
    
    Ended
    
    Ended
    
    EndedOctober 28, 2006
    
    November 3, 2007
    
    October 28, 2006
    
    November 3, 2007Stock options
    
    
    114,206
    
    
    
    93,413
    
    
    
    222,323
    
    
    
    81,211Restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,896Convertible securities (1)
    
    
    
    
    
    
    444,441
    
    
    
    
    
    
    
    211,639Stock purchase warrants (2)
    
    
    42,376
    
    
    
    
    
    
    
    113,698
    
    
    
    
 
 (1)
    
    Interest expense related to shares underlying subordinated convertible debentures was not
added back to the diluted earnings per share calculation for the thirteen and thirty-nine
weeks ended November 3, 2007 because the shares underlying the convertible debentures were
antidilutive.(2)
    
    The 384,000 outstanding stock purchase warrants were excluded from the diluted earnings per
share calculation for the thirteen and thirty-nine weeks ended November 3, 2007 because they
had exercise prices that were greater than the average closing price of the Companys common
stock for those periods. 6. Revolving Credit Facility
  10




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##### Table of Contents



7. Private Placement of Subordinated Convertible Debentures
  8. Impairment of Long-Lived assets
 Accounting for the Impairment or Disposal of Long-Lived
Assets.
 9. Subsequent Event  Sale of Leasehold Interest
  11




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion should be read in conjunction with the Companys unaudited condensed
financial statements and notes thereto provided herein and the Companys audited financial
statements and notes thereto in our annual report on Form 10-K. The following Managements
Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ materially from the
results discussed in the forward-looking statements. The factors that might cause such a difference
also include, but are not limited to, those discussed in our Annual Report on Form 10-K under Item
1. Business  Cautionary Note Regarding Forward-Looking Statements and Risk Factors and under
Item 1. Business  Risk Factors and those discussed elsewhere in our Annual Report on Form 10-K
and elsewhere in this report.
 Overview
   Deferred Income
    12




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Critical Accounting Policies
   Merchandise inventories
  Store closing and impairment charges
 Accounting for the Disposal of Long-Lived Assets
  Stock-based compensation expense
 Share-Based
Payment
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##### Table of Contents



Deferred income taxes
 Accounting for Income Taxes
 Accounting for Income Taxes
   Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 14




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##### Table of Contents



Results of Operations
  Thirteen
    
    Thirteen
    
    Thirty-
    
    Thirty-Weeks
    
    Weeks
    
    nine Weeks
    
    nine WeeksEnded
    
    Ended
    
    Ended
    
    EndedOctober 28,
    
    November 3,
    
    October 28,
    
    November 3,2006
    
    2007
    
    2006
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and buying expense
    
    
    74.0
    
    
    
    91.3
    
    
    
    70.8
    
    
    
    78.7Gross profit
    
    
    26.0
    
    
    
    8.7
    
    
    
    29.2
    
    
    
    21.3Selling expense
    
    
    23.6
    
    
    
    27.9
    
    
    
    22.3
    
    
    
    26.1General and administrative expense
    
    
    10.7
    
    
    
    11.8
    
    
    
    9.7
    
    
    
    10.4Loss on disposal of property and equipment
    
    
    0.2
    
    
    
    
    
    
    
    0.2
    
    
    
    Impairment of long-lived assets
    
    
    
    
    
    
    5.9
    
    
    
    
    
    
    
    2.4Operating income (loss)
    
    
    (8.5
    )
    
    
    (36.9
    )
    
    
    (3.0
    )
    
    
    (17.6
    )Other income (expense)
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Interest expense
    
    
    (0.7
    )
    
    
    (1.2
    )
    
    
    (0.4
    )
    
    
    (1.0
    )Loss before income taxes
    
    
    (9.1
    )
    
    
    (38.0
    )
    
    
    (3.3
    )
    
    
    (18.5
    )Income tax expense (benefit)
    
    
    (3.5
    )
    
    
    
    
    
    
    (1.3
    )
    
    
    0.5Net loss
    
    
    (5.6
    )%
    
    
    (38.0
    )%
    
    
    (2.0
    )%
    
    
    (19.0
    )%
  Thirteen
    
    Thirteen
    
    Thirty-
    
    Thirty-Weeks
    
    Weeks
    
    nine Weeks
    
    nine WeeksEnded
    
    Ended
    
    Ended
    
    EndedOctober 28,
    
    November 3,
    
    October 28,
    
    November 3,2006
    
    2007
    
    2006
    
    2007Number of stores at beginning of period
    
    
    247
    
    
    
    257
    
    
    
    235
    
    
    
    257Stores opened during period
    
    
    15
    
    
    
    0
    
    
    
    31
    
    
    
    6Stores closed during period
    
    
    (1
    )
    
    
    0
    
    
    
    (5
    )
    
    
    (6
    )Number of stores at end of period
    
    
    261
    
    
    
    257
    
    
    
    261
    
    
    
    257
 Thirteen Weeks Ended November 3, 2007 Compared to Thirteen Weeks Ended October 28, 2006
 Net sales.
 Gross profit.
 Selling expense.
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##### Table of Contents



General and administrative expense.
 Impairment of long-lived assets
 Interest expense.
 Income tax expense (benefit).
 Net loss
 Thirty-nine Weeks Ended November 3, 2007 Compared to Thirty-nine Weeks Ended October 28, 2006
 Net sales.
 Gross profit.
 Selling expense.
 General and administrative expense.
 Impairment of long-lived assets
 Interest expense.
 16




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Income tax expense (benefit).
 Net loss
 Seasonality and Quarterly Fluctuations
  Liquidity and Capital Resources
      17




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October 28, 2006
    
    February 3, 2007
    
    November 3, 2007Cash
    
    $
    180,341
    
    
    $
    407,346
    
    
    $
    247,518Inventories
    
    
    27,499,098
    
    
    
    24,102,006
    
    
    
    21,634,947Total current assets
    
    
    35,602,032
    
    
    
    30,809,573
    
    
    
    26,633,167Revolving Credit Facility
    
    
    19,806,713
    
    
    
    13,099,304
    
    
    
    21,186,579Total current liabilities
    
    
    38,283,146
    
    
    
    32,518,530
    
    
    
    42,482,654Net working capital
    
    
    (2,681,114
    )
    
    
    (1,708,957
    )
    
    
    (15,849,487
    )Property and equipment, net
    
    
    50,192,784
    
    
    
    51,021,077
    
    
    
    45,386,007Total assets
    
    
    87,118,989
    
    
    
    83,158,859
    
    
    
    73,210,682Total shareholders equity
    
    
    39,698,889
    
    
    
    41,166,849
    
    
    
    16,514,780Unused borrowing capacity*
    
    
    4,461,921
    
    
    
    6,100,178
    
    
    
    1,441,896
 
 *
    
    as calculated under the terms of our revolving credit facility Operating activities
   Investing activities
   18




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Financing activities
        19




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Accounting for Contingencies
  20




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Off-Balance Sheet Arrangements
  Contractual Obligations
  Payments due by PeriodLess thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1 - 3 Years
    
    
    3 -5 Years
    
    
    More than 5 YearsLong-term debt obligations (1)
    
    $
    5,933,779
    
    
    $
    392,667
    
    
    $
    771,084
    
    
    $
    4,770,028
    
    
    $
    Capital lease obligations (2)
    
    
    108,691
    
    
    
    108,691
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations (3)
    
    
    212,361,973
    
    
    
    24,886,205
    
    
    
    51,438,399
    
    
    
    48,226,681
    
    
    
    87,810,688Purchase obligations (4)
    
    
    26,927,484
    
    
    
    26,303,748
    
    
    
    529,471
    
    
    
    94,265
    
    
    
    Total
    
    $
    245,331,927
    
    
    $
    51,691,311
    
    
    $
    52,738,954
    
    
    $
    53,090,974
    
    
    $
    87,810,688
 
 (1)
    
    Includes principal and interest payments.(2)
    
    Includes payment obligations relating to our point of sale hardware and software leases.(3)
    
    Includes minimum payment obligations related to our store leases.(4)
    
    Includes merchandise on order and payment obligations relating to store construction and
miscellaneous service contracts. Recent Accounting Pronouncements
   Effect of Inflation
  21




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures.
 Internal Control Over Financial Reporting.
 
 PART II  OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  
 ITEM 6. EXHIBITS
  22




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##### Table of Contents



SIGNATURES
   BAKERS FOOTWEAR GROUP, INC.(Registrant)By:
    
    /s/ Peter A. EdisonPeter A. EdisonChairman of the Board of Directors, Chief Executive Officer and President(On behalf of the Registrant)By:
    
    /s/ Lawrence L. Spanley, Jr.Lawrence L. Spanley, Jr.Chief Financial Officer, Executive Vice President, Treasurer, and Secretary(As principal financial officer)
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EXHIBIT INDEX
 Exhibit No.
    
    Description of Exhibit3.1
    
    Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Companys
Annual Report on Form 10-K for the fiscal year ended January
3, 2004 filed on April 2, 2004 (File No. 000-50563)).3.2
    
    Restated Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Companys Annual Report on Form 10-K for
the fiscal year ended January 3, 2004 filed on April 2, 2004
(File No. 000-50563)).10.1
    
    Summary of October 3, 2007 stock option grants and restricted
stock awards for Peter A. Edison, Mark D. Ianni, Joseph R.
Vander Pluym and Stanley K. Tusman (incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form 8-K
dated October 3, 2007 (File No. 000-50563)).10.2
    
    Form of Restricted Stock Award Agreement under Bakers Footwear
Group, Inc. 2005 Incentive Compensation Plan (incorporated by
reference to Exhibit 10.4 to the Companys Current Report on
Form 8-K dated October 3, 2007 (File No. 000-50563)).11.1
    
    Statement regarding computation of per share earnings
(incorporated by reference from Note 5 of the Companys
unaudited interim financial statements included herein).31.1
    
    Rule 13a-14(a)/15d-14(a) Certification (pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, executed by Chief
Executive Officer).31.2
    
    Rule 13a-14(a)/15d-14(a) Certification (pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, executed by Chief
Financial Officer).32.1
    
    Section 1350 Certification (pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, executed by Chief Executive
Officer).32.2
    
    Section 1350 Certification (pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, executed by Chief Financial
Officer).
 24