##### 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 October 29, 2005
 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 of other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)2815 Scott Avenue,
St. Louis, Missouri(Address of principal executive offices)
    
    63103(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)
 R £
 £ R
 £ R




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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 Statements 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
    
    12-20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    20Item 4. Controls and Procedures
    
    20-21Part II Other InformationItem 2. Changes in Securities and Use of Proceeds
    
    22Item 6. Exhibits
    
    22Signatures
    
    23Exhibit Index
    
    24Rule 13a-14(a)/15d-14(a) Certification by CEORule 13a-14(a)/15d-14(a) Certification by CFOSection 1350 Certification by CEOSection 1350 Certification by CFO
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED BALANCE SHEETS
 October 30, 2004
    
    
    January 1, 2005
    
    
    October 29, 2005Unaudited
    
    
    
    
    
    
    UnauditedAssetsCurrent assets:Cash and cash equivalents
    
    $
    141,249
    
    
    $
    6,675,135
    
    
    $
    128,314Accounts receivable
    
    
    942,518
    
    
    
    1,237,450
    
    
    
    1,489,024Other receivables
    
    
    711,177
    
    
    
    645,855
    
    
    
    1,257,975Inventories
    
    
    18,220,401
    
    
    
    16,790,753
    
    
    
    24,950,807Prepaid expenses and other current assets
    
    
    811,185
    
    
    
    1,048,347
    
    
    
    931,444Prepaid income taxes
    
    
    
    
    
    
    
    
    
    
    1,822,703Deferred income taxes
    
    
    3,559,256
    
    
    
    1,904,963
    
    
    
    1,537,312Total current assets
    
    
    24,385,786
    
    
    
    28,302,503
    
    
    
    32,117,579Property and equipment, net
    
    
    18,874,233
    
    
    
    20,714,211
    
    
    
    34,596,070Other assets
    
    
    311,954
    
    
    
    353,994
    
    
    
    553,016Total assets
    
    $
    43,571,973
    
    
    $
    49,370,708
    
    
    $
    67,266,665Liabilities and shareholders equityCurrent liabilities:Accounts payable
    
    $
    7,745,494
    
    
    $
    6,662,044
    
    
    $
    10,107,873Accrued expenses
    
    
    4,471,517
    
    
    
    7,457,043
    
    
    
    8,124,983Sales tax payable
    
    
    601,947
    
    
    
    1,422,716
    
    
    
    726,651Deferred income
    
    
    763,682
    
    
    
    914,814
    
    
    
    1,168,467Revolving credit facility
    
    
    899,755
    
    
    
    
    
    
    
    5,077,992Current maturities of capital lease obligations
    
    
    714,845
    
    
    
    667,698
    
    
    
    439,524Total current liabilities
    
    
    15,197,240
    
    
    
    17,124,315
    
    
    
    25,645,490Obligations under capital leases, less current maturities
    
    
    766,526
    
    
    
    679,414
    
    
    
    327,003Accrued rent liabilities
    
    
    3,568,106
    
    
    
    3,686,119
    
    
    
    5,974,116Deferred income taxes
    
    
    463,698
    
    
    
    806,323
    
    
    
    208,400Shareholders 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, 5,102,481 shares outstanding at October 30,
2004 and January 1, 2005; 6,206,933 shares outstanding
at October 29, 2005
    
    
    510
    
    
    
    510
    
    
    
    621Additional paid-in capital
    
    
    25,623,630
    
    
    
    25,623,630
    
    
    
    33,501,662Retained earnings (deficit)
    
    
    (2,047,737
    )
    
    
    1,450,397
    
    
    
    1,609,373Total shareholders equity
    
    
    23,576,403
    
    
    
    27,074,537
    
    
    
    35,111,656Total liabilities and shareholders equity
    
    $
    43,571,973
    
    
    $
    49,370,708
    
    
    $
    67,266,665
  3




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedOctober 30,
    
    
    October 29,
    
    
    October 30,
    
    
    October 29,2004
    
    
    2005
    
    
    2004
    
    
    2005Net sales
    
    $
    32,286,599
    
    
    $
    43,242,897
    
    
    $
    106,365,547
    
    
    $
    133,441,637Cost of merchandise sold, occupancy, and buying expenses
    
    
    25,384,289
    
    
    
    31,402,544
    
    
    
    76,535,276
    
    
    
    91,211,344Gross profit
    
    
    6,902,310
    
    
    
    11,840,353
    
    
    
    29,830,271
    
    
    
    42,230,293Operating expenses:Selling
    
    
    7,678,915
    
    
    
    9,352,861
    
    
    
    22,745,515
    
    
    
    27,106,619General and administrative
    
    
    3,094,201
    
    
    
    3,968,239
    
    
    
    9,909,937
    
    
    
    11,317,149Loss on disposal or impairment of property and equipment
    
    
    89,750
    
    
    
    231,615
    
    
    
    364,904
    
    
    
    430,246Operating income (loss)
    
    
    (3,960,556
    )
    
    
    (1,712,362
    )
    
    
    (3,190,085
    )
    
    
    3,376,279Other income (expense):Interest expense
    
    
    (191,538
    )
    
    
    (95,775
    )
    
    
    (694,460
    )
    
    
    (308,666
    )Other, net
    
    
    24,283
    
    
    
    20,211
    
    
    
    209,348
    
    
    
    122,605Income (loss) before income taxes
    
    
    (4,127,811
    )
    
    
    (1,787,926
    )
    
    
    (3,675,197
    )
    
    
    3,190,218Provision for (benefit from) income taxes
    
    
    (1,549,181
    )
    
    
    (737,944
    )
    
    
    (1,347,625
    )
    
    
    1,165,443Net income (loss)
    
    $
    (2,578,630
    )
    
    $
    (1,049,982
    )
    
    $
    (2,327,572
    )
    
    $
    2,024,775Basic earnings (loss) per share
    
    $
    (0.51
    )
    
    $
    (0.17
    )
    
    $
    (0.47
    )
    
    $
    0.34Diluted earnings (loss) per share
    
    $
    (0.51
    )
    
    $
    (0.17
    )
    
    $
    (0.47
    )
    
    $
    0.33
  4




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 CONDENSED
STATEMENTS OF SHAREHOLDERS EQUITY
(Unaudited)
 Common StockShares
    
    
    
    
    
    
    Additional
    
    
    RetainedIssued and
    
    
    
    
    
    
    Paid-In
    
    
    EarningsOutstanding
    
    
    Amount
    
    
    Capital
    
    
    (Deficit)
    
    
    TotalBalance at January 1, 2005
    
    
    5,102,481
    
    
    $
    510
    
    
    $
    25,623,630
    
    
    $
    1,450,397
    
    
    $
    27,074,537Net loss for transition period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,865,799
    )
    
    
    (1,865,799
    )Balance at January 29, 2005
    
    
    5,102,481
    
    
    
    510
    
    
    
    25,623,630
    
    
    
    (415,402
    )
    
    
    25,208,738Shares issued in connection
with private placement of
common stock and warrants
    
    
    1,000,000
    
    
    
    100
    
    
    
    7,538,319
    
    
    
    
    
    
    
    7,538,419Shares issued in connection
with exercise of stock
options
    
    
    104,452
    
    
    
    11
    
    
    
    77,482
    
    
    
    
    
    
    
    77,493Income tax benefit from
exercise of stock options
    
    
    
    
    
    
    
    
    
    
    262,231
    
    
    
    
    
    
    
    262,231Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,024,775
    
    
    
    2,024,775Balance at October 29, 2005
    
    
    6,206,933
    
    
    $
    621
    
    
    $
    33,501,662
    
    
    $
    1,609,373
    
    
    $
    35,111,656
  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 30, 2004
    
    
    October 29, 2005Operating activitiesNet income (loss)
    
    $
    (2,327,572
    )
    
    $
    2,024,775Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    2,454,016
    
    
    
    3,721,459Deferred income taxes
    
    
    (1,510,188
    )
    
    
    741,641Income tax benefit from exercise of stock options
    
    
    
    
    
    
    262,231Beneficial conversion of subordinated debentures
    
    
    163,333
    
    
    
    Loss on disposal or impairment of property and equipment
    
    
    364,904
    
    
    
    430,246Changes in operating assets and liabilities:Accounts receivable
    
    
    (805,022
    )
    
    
    (1,404,390
    )Inventories
    
    
    (5,050,321
    )
    
    
    (7,148,452
    )Prepaid expenses and other current assets
    
    
    52,685
    
    
    
    249,312Prepaid income taxes
    
    
    
    
    
    
    (1,822,703
    )Other assets
    
    
    712,575
    
    
    
    (175,549
    )Accounts payable
    
    
    4,553,620
    
    
    
    1,604,213Accrued expenses and deferred income
    
    
    (409,095
    )
    
    
    2,787,588Accrued rent liabilities
    
    
    936,827
    
    
    
    2,272,668Net cash provided by (used in) operating activities
    
    
    (864,238
    )
    
    
    3,543,039Investing activitiesPurchase of property and equipment
    
    
    (8,414,272
    )
    
    
    (17,040,095
    )Proceeds from sale of property and equipment
    
    
    43,692
    
    
    
    20,229Net cash used in investing activities
    
    
    (8,370,580
    )
    
    
    (17,019,866
    )Financing activitiesNet advances (repayments) under revolving credit facility
    
    
    (4,035,187
    )
    
    
    5,077,992Proceeds from sales of common stock and warrants
    
    
    15,530,993
    
    
    
    7,538,419Proceeds from exercise of stock options
    
    
    
    
    
    
    77,493Principal payments under capital lease obligations
    
    
    (706,242
    )
    
    
    (520,522
    )Principal payments of subordinated debt
    
    
    (859,910
    )
    
    
    Payment to retire stock warrants
    
    
    (850,000
    )
    
    
    Cash distributions to shareholders
    
    
    (13,386
    )
    
    
    Net cash provided by financing activities
    
    
    9,066,268
    
    
    
    12,173,382Net decrease in cash and cash equivalents
    
    
    (168,550
    )
    
    
    (1,303,445
    )Cash and cash equivalents at beginning of period
    
    
    309,799
    
    
    
    1,431,759Cash and cash equivalents at end of period
    
    $
    141,249
    
    
    $
    128,314Supplemental disclosures of cash flow informationCash paid for income taxes
    
    $
    141,832
    
    
    $
    1,852,289Cash paid for interest
    
    $
    595,130
    
    
    $
    287,168
  6




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##### Table of Contents



BAKERS FOOTWEAR GROUP, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
Unaudited
 1. Basis of Presentation
  2. Change in Fiscal Year
  3. Private Placement of Common Stock and Warrants
    4. Initial Public Offering
  7




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##### Table of Contents



5. Income Taxes
  Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedOctober 30, 2004
    
    
    October 29, 2005
    
    
    October 30, 2004
    
    
    October 29, 2005Current:Federal
    
    $
    (13,356
    )
    
    $
    (212,774
    )
    
    $
    111,632
    
    
    $
    356,886State and local
    
    
    12,495
    
    
    
    (39,895
    )
    
    
    50,931
    
    
    
    66,916Total current
    
    
    (861
    )
    
    
    (252,669
    )
    
    
    162,563
    
    
    
    423,802Deferred:Federal
    
    
    (1,303,848
    )
    
    
    (408,653
    )
    
    
    (1,271,737
    )
    
    
    624,539State and local
    
    
    (244,472
    )
    
    
    (76,622
    )
    
    
    (238,451
    )
    
    
    117,102Total deferred
    
    
    (1,548,320
    )
    
    
    (485,275
    )
    
    
    (1,510,188
    )
    
    
    741,641Total income tax expense (benefit)
    
    $
    (1,549,181
    )
    
    $
    (737,944
    )
    
    $
    (1,347,625
    )
    
    $
    1,165,443
  Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedOctober 30, 2004
    
    
    October 29, 2005
    
    
    October 30, 2004
    
    
    October 29, 2005Federal income tax at 34% statutory rate
    
    $
    (1,403,456
    )
    
    $
    (607,895
    )
    
    $
    (1,249,566
    )
    
    $
    1,084,682State and local taxes, net of federal income taxes
    
    
    (150,112
    )
    
    
    (71,517
    )
    
    
    (115,711
    )
    
    
    127,610Permanent differences
    
    
    4,387
    
    
    
    (58,532
    )
    
    
    17,652
    
    
    
    (46,849
    )Total income tax expense (benefit)
    
    $
    (1,549,181
    )
    
    $
    (737,944
    )
    
    $
    (1,347,625
    )
    
    $
    1,165,443
  8




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##### Table of Contents



October 30, 2004
    
    
    January 1, 2005
    
    
    October 29, 2005Deferred tax assets:Net operating loss carryforward
    
    $
    2,198,591
    
    
    $
    732,028
    
    
    $
    Vacation accrual
    
    
    325,768
    
    
    
    353,950
    
    
    
    407,530Inventory
    
    
    1,034,898
    
    
    
    818,985
    
    
    
    1,291,720Stock-based compensation
    
    
    426,634
    
    
    
    426,634
    
    
    
    276,129Accrued rent
    
    
    1,355,880
    
    
    
    1,413,911
    
    
    
    2,138,973Total deferred tax assets
    
    
    5,341,771
    
    
    
    3,745,508
    
    
    
    4,114,352Deferred tax liabilities:Prepaid expenses
    
    
    
    
    
    
    
    
    
    
    161,937Property and equipment
    
    
    2,246,213
    
    
    
    2,646,868
    
    
    
    2,623,503Total deferred tax liabilities
    
    
    2,246,213
    
    
    
    2,646,868
    
    
    
    2,785,440Net deferred tax assets
    
    $
    3,095,558
    
    
    $
    1,098,640
    
    
    $
    1,328,912
 6. Stock-Based Compensation
 Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
   Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedOctober 30, 2004
    
    
    October 29, 2005
    
    
    October 30, 2004
    
    
    October 29, 2005Net income (loss) as reported
    
    $
    (2,578,630
    )
    
    $
    (1,049,982
    )
    
    $
    (2,327,572
    )
    
    $
    2,024,775Add: Stock based compensation
expense included in net income as
reported
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deduct: Stock based compensation
expense determined under fair
value method, net of related
income tax effect
    
    
    (99,826
    )
    
    
    (151,576
    )
    
    
    (299,478
    )
    
    
    (406,694
    )Pro forma net income (loss)
    
    $
    (2,678,456
    )
    
    $
    (1,201,558
    )
    
    $
    (2,627,050
    )
    
    $
    1,618,081Basic earnings (loss) per share:As reported
    
    $
    (0.51
    )
    
    $
    (0.17
    )
    
    $
    (0.47
    )
    
    $
    0.34Pro forma
    
    $
    (0.52
    )
    
    $
    (0.19
    )
    
    $
    (0.53
    )
    
    $
    0.27Diluted earnings (loss) per share:As reported
    
    $
    (0.51
    )
    
    $
    (0.17
    )
    
    $
    (0.47
    )
    
    $
    0.33Pro forma
    
    $
    (0.52
    )
    
    $
    (0.19
    )
    
    $
    (0.53
    )
    
    $
    0.26
  Share-Based
Payment Accounting for Stock-Based Compensation
 9




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##### Table of Contents



7. Earnings (Loss) Per Share
   Thirteen
    
    
    Thirteen
    
    
    Thirty-nine
    
    
    Thirty-nineWeeks Ended
    
    
    Weeks Ended
    
    
    Weeks Ended
    
    
    Weeks EndedOctober 30, 2004
    
    
    October 29, 2005
    
    
    October 30, 2004
    
    
    October 29, 2005Numerator:Numerator for basic earnings per share  Net
income (loss)
    
    $
    (2,578,630
    )
    
    $
    (1,049,982
    )
    
    $
    (2,327,572
    )
    
    $
    2,024,775Interest expense related to convertible debentures
    
    
    
    
    
    
    
    
    
    
    5,754
    
    
    
    Numerator for diluted earnings per share
    
    $
    (2,578,630
    )
    
    $
    (1,049,982
    )
    
    $
    (2,321,818
    )
    
    $
    2,024,775Denominator
for basic earnings per share 
weighted average shares
    
    
    5,102,481
    
    
    
    6,198,305
    
    
    
    4,930,826
    
    
    
    5,896,052Effect of dilutive securitiesStock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    233,888Stock purchase warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,587Redeemable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted earnings per share 
adjusted weighted average shares and assumed
conversions
    
    
    5,102,481
    
    
    
    6,198,305
    
    
    
    4,930,826
    
    
    
    6,164,527
  Thirteen
    
    Thirteen
    
    Thirty-nine
    
    Thirty-nineWeeks Ended
    
    Weeks Ended
    
    Weeks Ended
    
    Weeks EndedOctober 30, 2004
    
    October 29, 2005
    
    October 30, 2004
    
    October 29, 2005Stock options
    
    
    234,017
    
    
    
    235,449
    
    
    
    247,703
    
    
    
    
    Stock purchase warrants
    
    
    
    
    
    
    118,990
    
    
    
    8,451
    
    
    
    
    Redeemable securities
    
    
    
    
    
    
    
    
    
    
    75,021
    
    
    
    
    Convertible securities
    
    
    
    
    
    
    
    
    
    
    23,932
    
    
    
    
    
 8. Revolving Credit Facility
  10




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##### Table of Contents



9. Impact of Hurricane Katrina
    11




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##### Table of Contents



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 Statements Regarding Forward-Looking Statements and Certain Risks.
 Overview
        Critical Accounting Policies
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Merchandise inventories
  Store closing and impairment charges
 Accounting for the Disposal of Long-Lived Assets
 Deferred income taxes
 Accounting for Income Taxes
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##### Table of Contents



Results of Operations
  Thirteen
    
    Thirteen
    
    Thirty-nine
    
    Thirty-nineWeeks Ended
    
    Weeks Ended
    
    Weeks Ended
    
    Weeks EndedOctober 30, 2004
    
    October 29, 2005
    
    October 30, 2004
    
    October 29, 2005Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of merchandise sold, occupancy and
buying expense
    
    
    78.6
    
    
    
    72.6
    
    
    
    72.0
    
    
    
    68.4Gross profit
    
    
    21.4
    
    
    
    27.4
    
    
    
    28.0
    
    
    
    31.6Selling expense
    
    
    23.8
    
    
    
    21.6
    
    
    
    21.4
    
    
    
    20.3General and administrative expense
    
    
    9.6
    
    
    
    9.2
    
    
    
    9.3
    
    
    
    8.5Loss on disposal or impairment of
property and equipment
    
    
    0.3
    
    
    
    0.5
    
    
    
    0.3
    
    
    
    0.3Operating income (loss)
    
    
    (12.3
    )
    
    
    (3.9
    )
    
    
    (3.0
    )
    
    
    2.5Other income (expense), net
    
    
    0.1
    
    
    
    0.0
    
    
    
    0.2
    
    
    
    0.1Interest expense
    
    
    (0.6
    )
    
    
    (0.2
    )
    
    
    (0.7
    )
    
    
    (0.2
    )Income (loss) before income taxes
    
    
    (12.8
    )
    
    
    (4.1
    )
    
    
    (3.5
    )
    
    
    2.4Provision for (benefit from) income taxes
    
    
    (4.8
    )
    
    
    (1.7
    )
    
    
    (1.3
    )
    
    
    0.9Net income (loss)
    
    
    (8.0
    )%
    
    
    (2.4
    )%
    
    
    (2.2
    )%
    
    
    1.5
    %
  Thirteen
    
    Thirteen
    
    Thirty-nine
    
    Thirty-nineWeeks Ended
    
    Weeks Ended
    
    Weeks Ended
    
    Weeks EndedOctober 30, 2004
    
    October 29, 2005
    
    October 30, 2004
    
    October 29, 2005Number of stores at beginning of period
    
    
    207
    
    
    
    225
    
    
    
    208
    
    
    
    218Stores opened during period
    
    
    11
    
    
    
    11
    
    
    
    12
    
    
    
    24Stores closed during period
    
    
    (1
    )
    
    
    (2
    )
    
    
    (3
    )
    
    
    (8
    )Number of stores at end of period
    
    
    217
    
    
    
    234
    
    
    
    217
    
    
    
    234
 Thirteen Weeks Ended October 29, 2005 Compared to Thirteen Weeks Ended October 30, 2004
 Net sales.
 Gross profit.
 Selling expense.
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General and administrative expense.
 Loss on disposal or impairment of property and equipment
 Interest expense.
 Income tax benefit.
 Net loss
 Thirty-nine Weeks Ended October 29, 2005 Compared to Thirty-nine Weeks Ended October 30, 2004
 Net sales.
 Gross profit.
 Selling expense.
 General and administrative expense.
 Interest expense.
 Income tax expense (benefit).
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##### Table of Contents



Net income (loss)
 Seasonality and Quarterly Fluctuations
    Liquidity and Capital Resources
   October 30, 2004
    
    January 1, 2005
    
    October 29, 2005Cash
    
    $
    141,249
    
    
    $
    6,675,135
    
    
    $
    128,314Inventories
    
    
    18,220,401
    
    
    
    16,790,753
    
    
    
    24,950,807Total current assets
    
    
    24,385,786
    
    
    
    28,302,503
    
    
    
    32,117,579Revolving credit facility
    
    
    899,755
    
    
    
    
    
    
    
    5,077,992Total current liabilities
    
    
    15,197,240
    
    
    
    17,124,315
    
    
    
    25,645,490Net working capital
    
    
    9,188,546
    
    
    
    11,178,188
    
    
    
    6,472,089Property and equipment, net
    
    
    18,874,233
    
    
    
    20,714,211
    
    
    
    34,596,070Total assets
    
    
    43,571,973
    
    
    
    49,370,708
    
    
    
    67,266,665Total shareholders equity
    
    
    23,576,403
    
    
    
    27,074,537
    
    
    
    35,111,656Unused borrowing capacity*
    
    
    12,724,293
    
    
    
    12,354,131
    
    
    
    13,885,016
 
 *
    
    - as calculated under the terms of our revolving credit facility  Operating activities
  16




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Investing activities
     Financing activities
   17




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##### Table of Contents



Accounting for Derivative Instruments and
Hedging Activities Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock, The Effect of a
Liquidated Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No. 00-19,
Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock,
       18




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Off-Balance Sheet Arrangements
  19




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##### Table of Contents



Contractual Obligations
  Payments due in PeriodLess thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1 - 3 Years
    
    
    3 -5 Years
    
    
    More than 5 YearsRevolving credit facility
    
    $
    5,077,992
    
    
    $
    5,077,992
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital lease obligations (1)
    
    
    1,023,671
    
    
    
    602,931
    
    
    
    408,236
    
    
    
    12,504
    
    
    
    Operating lease obligations (2)
    
    
    171,486,145
    
    
    
    21,421,454
    
    
    
    41,689,831
    
    
    
    38,218,648
    
    
    
    70,156,211Purchase obligations (3)
    
    
    27,960,375
    
    
    
    27,952,012
    
    
    
    8,364
    
    
    
    
    
    
    
    Total
    
    $
    205,548,184
    
    
    $
    55,054,389
    
    
    $
    42,106,431
    
    
    $
    38,231,152
    
    
    $
    70,156,211
 
 (1)
    
    Includes payment obligations relating to our point of sale hardware and software leases.(2)
    
    Includes minimum payment obligations related to our store leases.(3)
    
    Includes merchandise on order and payment obligations relating to miscellaneous service
contracts. Recent Accounting Pronouncements
 Share-Based Payment Accounting for Stock-Based Compensation
 Effect of Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
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Internal Control Over Financial Reporting
  21




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BAKERS FOOTWEAR GROUP, INC.
 
 PART II  OTHER INFORMATION
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  Issuer Purchases of Equity Securities
 (c) Total Number of(a) Total
    
    (b)
    
    Shares Purchased as
    
    (d) Maximum Number ofNumber of
    
    Average
    
    Part of Publicly
    
    Shares that May Yet BeShares
    
    Price Paid
    
    Announced Plans or
    
    Purchased Under thePeriod
    
    Purchased
    
    per Share
    
    Programs
    
    Plans or ProgramsJuly 31, 2005  August 27, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    August 28, 2005  October 1, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    October 2, 2005  October 29, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 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 andChief Executive Officer(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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##### Table of Contents



EXHIBIT INDEX
 Number
    
    Description3.1
    
    
    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
    
    
    Letter to Peter Edison dated September 12, 2005 outlining 2005 bonus levels
(incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on September 16, 2005 (File No. 000-50563)).10.2
    
    
    Letter to Michele Bergerac dated September 12, 2005 outlining 2005 bonus levels
(incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form
8-K filed on September 16, 2005 (File No. 000-50563)).10.3
    
    
    Letter to Stan Tusman dated September 12, 2005 outlining 2005 bonus levels
(incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form
8-K filed on September 16, 2005 (File No. 000-50563)).10.4
    
    
    Letter to Mark Ianni dated September 12, 2005 outlining 2005 bonus levels
(incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form
8-K filed on September 16, 2005 (File No. 000-50563)).10.5
    
    
    Letter to Joe Vander Pluym dated September 12, 2005 outlining 2005 bonus levels
(incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form
8-K filed on September 16, 2005 (File No. 000-50563)).10.6
    
    
    Letter to Larry Spanley dated September 12, 2005 outlining 2005 bonus levels
(incorporated by reference to Exhibit 10.6 to the Companys Current Report on Form
8-K filed on September 16, 2005 (File No. 000-50563)).11.1
    
    
    Statement regarding computation of per share earnings (incorporated by reference from
Note 7 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