SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the first twelve week accounting period ended March 26, 2005

OR

[  ]        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: 001-06024

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

Yes    X          No       

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes    X          No       

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.

There were 58,504,677 shares of Common Stock, $1 par value, outstanding as of April 29, 2005, of which 650,293 shares are held as Treasury Stock.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the footwear business, worldwide economics and the Company itself including, without limitation, statements regarding acceptance of new products, anticipated sell-throughs, future progress toward achieving the Company's strategic growth plan, estimated tax rate, the use of excess cash flows, future revenues, earnings and marketing, statements in Part I, Item 2 regarding the overview, the Company's financial condition, liquidity and capital resources and statements in Part I, Item 3 regarding market risk. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," "should," "will," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertaint ies and assumptions ("Risk Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.

Risk Factors include, but are not limited to, uncertainties relating to changes in demand for the Company's products; changes in consumer preferences or spending patterns; the cost and availability of inventories, services, labor and equipment furnished to the Company; the cost and availability of contract manufacturers; the cost and availability of raw materials, including leather; changes in planned consumer demand or at-once orders; customer order cancellations; the impact of competition and pricing by the Company's competitors; changes in government and regulatory policies; foreign currency fluctuation in valuations compared to the U.S. Dollar; changes in monetary controls and valuations of the Chinese Yuan; changes in trading policies or import and export regulations; changes in interest rates, tax laws, duties, tariffs, quotas or applicable assessments; technological developments; changes in local, domestic or international economic and market conditions; the size and growth of footwear markets; ser vice interruptions at shipping and receiving ports; changes in the amount or severity of inclement weather; changes due to the growth of Internet commerce; popularity of particular designs and categories of footwear; the ability of the Company to manage and forecast its growth and inventories; the ability to secure and protect trademarks, patents and other intellectual property; integration of operations of newly acquired businesses; changes in business strategy or development plans; the ability to attract and retain qualified personnel; the ability to retain rights to brands licensed by the Company; loss of significant customers; relationships with international distributors and licensees; the Company's ability to meet at-once orders; the exercise of future purchase options by the U.S. Department of Defense on previously awarded contracts; the risk of doing business in developing countries and economically volatile areas; retail buying patterns; consolidation in the retail sector; and the acceptability of U .S. brands in international markets. Additionally, concern regarding acts of terrorism, the war in Iraq and subsequent events have created significant global economic and political uncertainties that may have material and adverse effects on consumer demand, foreign sourcing of footwear, shipping and transportation, product imports and exports and the sale of products in foreign markets. These matters are representative of the Risk Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement. Historical operating results are not necessarily indicative of the results that may be expected in the future. The Risk Factors included here are not exhaustive. Other Risk Factors exist, and new Risk Factors emerge from time-to-time, that may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual resul ts. Furthermore, the Company undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

WOLVERINE WORLD WIDE, INC. AND SUBSIDIARIES

See notes to consolidated condensed financial statements

(  ) - Denotes deduction
See notes to consolidated condensed financial statements

See notes to consolidated condensed financial statements

See notes to consolidated condensed financial statements

(  ) - Denotes reduction in cash and cash equivalents
See notes to consolidated condensed financial statements

Notes to Consolidated Condensed Financial Statements
March 26, 2005 and March 27, 2004

1.  Summary of Significant Accounting Policies

NATURE OF OPERATIONS
Wolverine World Wide, Inc. (NYSE: WWW) is a leading designer, manufacturer and marketer of a broad line of quality casual shoes, performance outdoor footwear, work shoes and boots, uniform shoes and boots, constructed slippers and moccasins. The Company's global portfolio of owned and licensed brands includes: Bates®, CAT®, Harley-Davidson®, Hush Puppies®, HyTest®, Merrell®, Sebago®, Stanley® and Wolverine®. Apparel and licensing programs are utilized to extend the Company's owned brands into product categories beyond footwear. The Company also operates a retail division to showcase its brands and branded footwear from other manufacturers, a tannery that produces Wolverine Performance Leathers™ and a pigskin procurement operation.

BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for a complete presentation of the financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included in the accompanying financial statements. For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2005.

REVENUE RECOGNITION
Revenue is recognized on the sale of products manufactured or sourced by the Company when the related goods have been shipped and legal title has passed to the customer. Revenue generated through programs with licensees and distributors involving products bearing the Company's trademarks is recognized as earned according to stated contractual terms upon either the purchase or shipment of branded products by licensees and distributors.

The Company records provisions against gross revenue for estimated stock returns and cash discounts in the period when the related revenue is recorded. These estimates are based on factors that include, but are not limited to, historical stock returns, historical discounts taken and analysis of credit memorandum activity.

COST OF PRODUCTS SOLD
Cost of products sold for the Company's operations include the actual product costs, including inbound freight charges, purchasing and receiving costs, inspection costs, and internal transfer costs. Warehousing costs are included in selling and administrative expenses.

SEASONALITY
The Company's business is subject to seasonal influences and has twelve weeks in each of the first three quarters and sixteen or seventeen weeks in the fourth quarter. Both factors can cause significant differences in revenue and earnings from quarter to quarter; however, the differences have followed a consistent pattern in previous years.

RECLASSIFICATIONS
Certain prior period amounts on the consolidated condensed financial statements have been reclassified to conform to current period presentation. These reclassifications did not affect net earnings.

Notes to Consolidated Condensed Financial Statements - continued
March 26, 2005 and March 27, 2004

2.  Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

Options to purchase 314,671 shares of common stock at March 26, 2005 and 1,209,843 shares at March 27, 2004 have not been included in the denominator for the computation of diluted earnings per share because the related exercise prices were greater than the average market price for the period and, therefore, they were anti-dilutive.

STOCK SPLIT
On December 15, 2004 the Company announced a three-for-two stock split in the form of a stock dividend on shares of common stock outstanding at January 3, 2005 that was distributed to shareholders on February 1, 2005. All share and per share amounts in the consolidated condensed financial statements and related notes have been adjusted to reflect the stock split. Treasury shares were excluded from the stock split. Approximately half of the shares distributed in the stock split were issued out of treasury shares.

3.  Goodwill and Other Non-Amortizable Intangibles

The changes in the net carrying amounts of goodwill and trademarks are as follows (thousands of dollars):

4.  Comprehensive Income

Comprehensive income represents net earnings and any revenue, expenses, gains and losses that, under accounting principles generally accepted in the United States, are excluded from net earnings and recognized directly as a component of stockholders' equity.

The ending accumulated other comprehensive income is as follows (thousands of dollars):

Notes to Consolidated Condensed Financial Statements - continued
March 26, 2005 and March 27, 2004

The reconciliation from net earnings to comprehensive income is as follows (thousands of dollars):

5.  Business Segments

The Company has one reportable segment that is engaged in manufacturing, sourcing, marketing, licensing and distributing branded footwear and licensed apparel and accessories to the retail sector, including casual shoes, dress shoes, performance outdoor footwear, boots, uniform shoes, work shoes, slippers, moccasins and apparel and accessories. Revenue of this segment is derived from the sale of branded footwear to external customers as well as royalty income from the licensing of the Company's trademarks and brand names to licensees and distributors. The business units comprising the branded footwear and licensing segment manufacture or source, market and distribute products in a similar manner. Branded footwear and other licensed products are distributed through wholesale channels and under licensing and distributor arrangements.

The other business units in the following table consist of the Company's retail, tannery and pigskin procurement operations. The Company operated 71 domestic retail stores and five consumer-direct internet sites at March 26, 2005 that sell Company-manufactured and sourced products, as well as footwear manufactured by unaffiliated companies. The other business units distribute products through retail and wholesale channels.

There have been no material changes in the way the Company measures segment profits or in its basis of determining business segments.

Business segment information is as follows (thousands of dollars):

Notes to Consolidated Condensed Financial Statements - continued
March 26, 2005 and March 27, 2004

6.  Financial Instruments and Risk Management

The Company's financial instruments consist of cash and cash equivalents, accounts and notes receivable, accounts and notes payable and long-term debt. Except for fixed-rate, long-term debt at March 26, 2005 with a carrying value of $42,857,145 and a fair value of $44,995,694, the Company's estimate of the fair values of these financial instruments approximates their carrying amounts at March 26, 2005. Fair value was determined using discounted cash flow analyses and current interest rates for similar instruments. The Company does not hold or issue financial instruments for trading purposes.

The Company follows Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS Nos. 137 and 138, which requires that all derivative instruments be recorded on the consolidated condensed balance sheets at fair value and establishes criteria for designation and effectiveness of hedging relationships. The Company utilizes foreign currency forward exchange contracts to manage the volatility associated with foreign currency inventory purchases made by non-U.S. wholesale operations in the normal course of business. At March 26, 2005 and March 27, 2004, foreign exchange contracts with a notional value of $22,572,500 and $31,010,000, respectively, were outstanding to purchase various currencies (principally U.S. dollars) with maturities ranging up to 280 days. These contracts have been designated as cash flow hedges. As of March 26, 2005 and March 27, 2004, liabilities of $302,000 and $1,082,000, respectively, have been recor ded for the fair value of the foreign exchange contracts.

The fair value of the foreign currency forward exchange contracts represents the estimated receipts or payments necessary to terminate the contracts. Hedge effectiveness is evaluated by the hypothetical derivative method. Any hedge ineffectiveness is reported within the cost of products sold caption of the consolidated condensed statements of operations. Hedge ineffectiveness was not material to the consolidated condensed financial statements at March 26, 2005 and was a loss of approximately $672,000 for the quarter ended March 27, 2004. If, in the future, the foreign exchange contracts are determined to be ineffective hedges or terminated before their contractual termination dates, the Company would be required to reclassify into earnings all or a portion of the unrealized amounts related to the cash flow hedges that are currently included in accumulated other comprehensive income (loss) within stockholders' equity.

The Company does not generally require collateral or other security on trade accounts and notes receivable.

7.  Stock-Based Compensation

The Company has elected to follow Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, in accounting for its stock incentive plans because the alternative fair value accounting provided under SFAS No.123, Accounting for Stock-Based Compensation, requires the use of option valuation models that were not specifically developed for valuing the types of stock incentives maintained by the Company. Under APB Opinion No. 25, compensation expense is recognized when the market price of the stock underlying an award on the date of grant exceeds any related exercise price.

Pro forma information regarding net earnings and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its stock awards using the fair value method. The fair value of these awards was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for 2005 year-to-date: risk-free interest rate of 3.7% (3.0% in 2004); dividend yield of 1.1% (1.3% in 2004); expected market price volatility factor of 0.24 (0.36 in 2004); and an expected option life of four years.

The estimated weighted-average fair value for each option granted was $5.12 and $4.49 for year-to-date 2005 and 2004, respectively.

Notes to Consolidated Condensed Financial Statements - continued
March 26, 2005 and March 27, 2004

For purposes of pro forma disclosures, the estimated fair values of stock options are amortized to expense over the related vesting periods. The Company's pro forma information under SFAS No. 123 is as follows (thousands of dollars, except per share data):

8.  Pension Expense

A summary of net pension and SERP (Supplemental Executive Retirement Plan) expense recognized by the Company is as follows (thousands of dollars):

9.  Litigation and Contingencies

The Company is involved in various environmental claims and other legal actions arising in the normal course of business. The environmental claims include sites where the Environmental Protection Agency has notified the Company that it is a potentially responsible party with respect to environmental remediation. These remediation claims are subject to ongoing environmental impact studies, assessment of remediation alternatives, allocation of costs between responsible parties and concurrence by regulatory authorities and have not yet advanced to a stage where the Company's liability is fixed. However, after taking into consideration legal counsel's evaluation of all actions and claims against the Company, management is currently of the opinion that their outcome will not have a material effect on the Company's consolidated financial position or future results of operations.

Notes to Consolidated Condensed Financial Statements - continued
March 26, 2005 and March 27, 2004

Pursuant to certain of the Company's lease agreements, the Company has provided financial guarantees to third parties in the form of indemnification provisions. These provisions indemnify and reimburse third parties for costs, including but not limited to adverse judgments in lawsuits, taxes and operating costs. The terms of the guarantees are identical to the terms of the related lease agreements. The Company is not able to calculate the maximum potential amount of future payments it could be required to make under these guarantees, as the potential payments are dependent upon the occurrence of future unknown events.

The Company has future minimum royalty obligations due under the terms of certain licenses held by the Company. These minimum future obligations on licenses are as follows (thousands of dollars):

Minimum royalties are based on both fixed obligations and assumptions related to the consumer price index. Royalty obligations in excess of minimum requirements are based upon future sales levels. In accordance with these agreements, the Company incurred royalty expense of $710,000 and $735,000 for the first quarter of 2005 and 2004, respectively.

The terms of certain license agreements also require advertising expenditures based on the level of sales. In accordance with these agreements, the Company's advertising obligations, based on actual sales, totaled $428,000 and $521,000 for the first quarter of 2005 and 2004, respectively.

10.  Business Acquisitions

On January 3, 2005, the Company expanded its owned Wolverine® and CAT® Footwear operations in Canada. Based on a preliminary purchase price allocation, assets consisting primarily of inventory and fixed assets totaling approximately $1,412,000 were acquired from a former Wolverine® and CAT® Footwear distributor for cash of $2,146,000, subject to certain post-closing adjustments, and resulted in goodwill and intangible assets of approximately $734,000.

In the first quarter of 2005, the Company received notice from the minority stockholder of Wolverine Europe Limited requesting the exercise of a contractual right requiring the Company to purchase his 5% ownership based upon a pre-established formula effective January 3, 2005. As a result, no minority interest was recorded. Wolverine Europe Limited was established in 2002 as a new subsidiary to operate the CAT® Footwear business in the European market.

11.  New Accounting Standards

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment, which would require all share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated statements of operations based on their fair values, effective for public companies for fiscal years beginning after June 15, 2005. The Company intends to adopt SFAS No. 123(R) effective with its fiscal year beginning January 1, 2006. SFAS No. 123(R) permits public companies to adopt its requirements using either the modified prospective or retrospective method. The Company is currently evaluating the alternative methods of adoption.

The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the pro forma impact of SFAS No. 123 as disclosed in Note 7 to the consolidated condensed financial statements. SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets, an Amendment of APB Opinion No. 29. SFAS No. 153 amends APB 29, eliminating the exception to the fair-value principle for exchanges of "similar productive assets," which had been accounted for based on the book value of the assets surrendered with no gain recognition. The general requirement under APB 29 that non-monetary exchanges of assets be accounted for at fair value with gain or loss recognition was left intact, as long as the exchange has commercial substance and the fair value is determinable. The provisions of SFAS No. 153 should be applied prospectively, effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. As such, the Company is required to adopt these provisions at the beginning of the third quarter of fiscal 2005. The Company does not expect the adoption of SFAS No. 153 to have a material impact on its consolidated financial statements.

OVERVIEW
During the first quarter of 2005, Wolverine World Wide, Inc. (the "Company") achieved record revenue and earnings. Revenue grew 9.0% to $245.2 million from $224.9 million for the first quarter of 2004. Earnings per share during the first quarter grew to $0.27 per share compared to $0.20 per share for the same quarter last year, an increase of 35.0%. The first quarter results were driven by the Company's brand building efforts and product innovation resulting in accelerated consumer demand for the Company's products. The record first quarter earnings were achieved through significant gross margin expansion and operating improvements across the business. The balance sheet reflected an increase in accounts receivable of $13.1 million or 7.8% on a 9.0% sales gain, when compared to first quarter 2004 figures. Inventory levels rose $20.5 million or 11.8% compared to the first quarter of 2004. The entire inventory increase was driven by the Outdoor Group as Merrell® continues its transition to the "Continuum&tr ade;" product and Sebago® continues to expand its product lines. The Company realized improvements in both days' sales outstanding, 8.8%, and inventory turns, 3.1%, when compared to first quarter 2004. Additionally, the Company ended the first quarter of 2005 with $44.0 million in cash on hand and debt outstanding of $48.6 million.

The first quarter results were driven by the implementation and progress toward the Company's strategic growth plan initiated several years ago. The vision to become the world's premier non-athletic footwear company continues to be the goal of all associates in 2005.

Achievements during the first quarter of 2005 include:

Global Expansion

Product Innovation

Strategic Marketing

The Company continued to forge strong connections with its target consumers during the first quarter of 2005. The Merrell® Shop in Shop program added 16 locations which resulted in 140 Shop in Shops in the U.S. and 15 in Europe. Merrell® initiated a new consumer campaign with the theme "Let's Get Outside." The campaign will be executed in a variety of media and will be supported through outdoor sponsorships.

The following is a discussion of the Company's results of operations and liquidity and capital resources for the first quarter of 2005. The section should be read in conjunction with the consolidated condensed financial statements and notes. All share and per share amounts in Management's Discussion and Analysis of Financial Condition and Results of Operations have been adjusted to reflect the three-for-two stock split distributed on February 1, 2005.

Results of Operations - Comparison of the 12 Weeks Ended March 26, 2005 (2005 First Quarter) to the 12 Weeks Ended March 27, 2004 (2004 First Quarter)

The Company has one reportable segment that is engaged in manufacturing, sourcing, marketing, licensing and distributing branded footwear, licensed apparel and accessories. Within the Branded Footwear and Licensing segment, the Company has identified five operating units, consisting of the Wolverine Footwear Group (comprised of the Wolverine®, Hytest®, Bates® and Stanley® brands), the Outdoor Group (comprised of the Merrell® and Sebago® brands), the Heritage Brands Group (comprised of CAT® Footwear and Harley-Davidson® Footwear), The Hush Puppies Company, and Other Branded Footwear. The Company's other business units consist of Hush Puppies® Retail and Wolverine® Leathers (comprised of the tannery and procurement operations). The following is supplemental information on total revenue:

REVENUE
Revenue for the first quarter of 2005 increased $20.3 million over the first quarter of 2004. Increases in unit volume, changes in product mix and changes in selling price for the Branded Footwear and Licensing operations as discussed below contributed $15.9 million of the revenue increase. The impact of translating foreign denominated revenue to U.S. dollars improved revenue by $2.8 million. The other business units contributed $1.6 million to the increase. International revenue increased in the quarter to account for 33.0% of total revenue in 2005 as compared to 32.1% in 2004.

The Outdoor Group recorded an $11.5 million revenue increase in the quarter. The Merrell® business accounted for $9.7 million of the increase while Sebago® recorded a $1.8 million increase. The Merrell® success was driven by deliveries of the new Continuum™ performance product as well as strong shipments of spring sandals. The Merrell® division also experienced strong reorder activity of core product in the quarter. The Sebago® increase was driven by new product introductions in the athletic marine category which performed well in the specialty marine channel.

The Wolverine Footwear Group recorded a $1.9 million revenue decrease in the quarter. The Bates® uniform footwear business realized a $3.8 million reduction in revenue due to lower shipments to the Department of Defense. The lower demand was anticipated and is in line with the Company's plan. Partially offsetting the Bates® reduction was a $1.4 million revenue increase in the Wolverine® Boots and Shoes business. The increase was driven by a change in product mix to the higher priced Wolverine Multishox™ product as well as revenue from the conversion of the Wolverine® Boots and Shoes business in Canada to an owned wholesale operation. The Stanley® business also contributed a $0.5 million increase in revenue during the first quarter of 2005.

The Hush Puppies Company's revenue increased $5.2 million in the first quarter of 2005. The Hush Puppies® business in Canada, in the U.K., and with international licensees was strong during the quarter. The improved global product range and brand positioning has created success with international licensees as well as with wholesale customers in the U.K. and Canada. The U.S. business growth of $1.3 million was driven by increases in the department store channel of distribution.

The Heritage Brands Group experienced a $3.0 million increase in revenue during the quarter. CAT® Footwear's revenue increased $3.5 million driven by strong shipments in Europe as fashion-footwear specialty stores increased their representation of spring products, as well as additional incremental revenues from the conversion of the Canadian CAT® Footwear business to an owned wholesale operation. Harley-Davidson® Footwear revenue decreased $0.5 million in the quarter primarily due to less than anticipated at once business.

Revenue for other branded products improved in the first quarter of 2005 due to customers taking earlier delivery on key styles.

Within the Company's other business units, Hush Puppies® Retail reported an increase in revenue as a result of same store revenue increases of 7.8%. Two new retail stores were opened in the quarter for a total of 71 stores compared to 65 at first quarter end 2004. The Wolverine® Leathers operation reported a $0.4 million gain in revenue due to increased shipments to external customers.

The Company ended the first quarter of 2005 with an order backlog increase exceeding 11% above the prior year's level.

GROSS MARGIN
The gross margin of 39.3% for the first quarter of 2005 was a 130 basis point improvement over prior year. Benefits from favorable exchange rates comprised 60 basis points of the improvement. The remaining improvement was a result of an improved sales mix with increased sales of higher-margin lifestyle and performance products.

SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses of $72.1 million for the first quarter of 2005 increased $5.8 million from the first quarter 2004 level of $66.3 million and, as a percentage of revenue decreased to 29.4% in 2005 compared to 29.5% in the first quarter of 2004. The Company realized increases in pension and profit-sharing expenses of $1.3 million and increases in marketing and product development expenses of $1.5 million. The remaining dollar increases related primarily to selling and distribution costs which are variable to the increase in revenues.

INTEREST, OTHER & TAXES
The decrease in interest expense reflects lower average outstanding amounts on senior notes and minimal borrowing under the Company's revolving credit facility.

The change in other income primarily relates to the change in realized gains on foreign currency transactions.

The Company's first quarter 2005 effective income tax rate was 32.4% compared to 32.0% for the first quarter of 2004. The estimated annualized effective tax rate for fiscal 2005 is 32.4% and does not include any impact from the potential repatriation of foreign earnings and profits under the American Jobs Creation Act of 2004.

NET EARNINGS
As a result of the revenue, gross margin and expense changes discussed above, the Company achieved net earnings of $16.1 million for the first quarter of 2005 as compared to $12.3 million in the first quarter 2004, an increase of $3.8 million.

Cash of $38.8 million was used to fund working capital investments in the first quarter of 2005 compared to $25.6 million used in the first quarter of 2004. The balance sheet continued to improve with the first quarter 2005 accounts receivable up 7.8% and the number of days' sales outstanding reduced by 8.8% as compared to the first quarter 2004. Inventory levels increased 11.8% on a 9.0% increase in revenue over the same quarter last year and inventory turns improved by 3.1%. No single customer accounted for more than 5% of the outstanding accounts receivable balance at March 26, 2005.

The increase in accounts payable was primarily attributable to the timing of inventory purchases from contract suppliers. The increase in other accrued liabilities was primarily attributable to adjustments made for foreign currency forward exchange contracts, timing of various tax payments and increases in employee benefit accruals.

The majority of capital expenditures were for information system enhancements, consumer-direct initiatives, distribution equipment and building improvements. The Company leases machinery, equipment and certain warehouse, office and retail store space under operating lease agreements that expire at various dates through 2018.

In 2005, the Securities and Exchange Commission issued a letter aimed at clarifying certain issues regarding the accounting for operating leases. The issues discussed in the letter include the appropriate accounting treatment of leasehold improvement amortization, "rent holiday" periods, and landlord-paid incentives for leasehold improvements. While this clarifying guidance will result in a change in the Company's accounting for these issues, particularly with respect to "rent holiday" periods and landlord-paid incentives, the impact on the consolidated financial statements is not expected to be material.

The Company has a long-term revolving credit agreement that expires in May 2006 and allows for borrowings up to $150.0 million, of which $10.0 million is allocated to the Company's Canadian subsidiary. Of the remaining $140.0 million facility, $35.0 million can be utilized by the Company's European subsidiaries. The revolving credit facility is used to support working capital requirements. There was $4.7 million outstanding under the revolving credit facility at March 26, 2005 and no amount was outstanding at March 27, 2004. Proceeds from the existing credit facility and anticipated renewals, along with cash flows from operations, are expected to be sufficient to meet capital needs in the foreseeable future. Any excess cash flows from operating activities are expected to be used to purchase property,

plant and equipment, pay down existing debt, fund internal and external growth initiatives, pay dividends or repurchase the Company's common stock.

The decrease in debt at March 26, 2005 as compared to March 27, 2004 was the result of annual principal payments on the Company's senior notes and lower average borrowings made on the revolving credit facility to fund working capital investments. The Company had commercial letter-of-credit facilities outstanding of $1.3 million and $4.0 million at March 26, 2005 and March 27, 2004, respectively. The total debt to total capital ratio for the Company was 9.5% at the end of first quarter of 2005, 12.1% at the end of first quarter 2004 and 8.7% for the fiscal year ended January 1, 2005.

The Company's pension benefit costs and credits are based upon actuarial valuations. Inherent in these valuations are key assumptions, including discount rates and expected returns on plan assets. The Company is required to consider market conditions, including changes in interest rates, in selecting these assumptions. Pre-tax charges resulting from the Company's defined benefit pension plans increased $0.7 million for the 2005 first quarter when compared to the same period of 2004 due to the accounting for amortization of prior unrealized gains and losses.

The Company is analyzing the potential impact of the repatriation provision of the American Jobs Creation Act of 2004 (the "Act"), which would allow the Company to bring certain foreign earnings back to the United States at reduced tax rates effective until December 31, 2005. If elected, the amount of repatriation is not expected to exceed $70.0 million. However, technical corrections to the Act are pending issuance and therefore it is not currently practicable to estimate the potential range of impact on income taxes or liquidity.

The Company's Board of Directors approved a common stock repurchase program on October 5, 2004. This program authorized the repurchase of 3.0 million shares of common stock over a 24-month period commencing on the effective date of the program. There were 350,500 shares ($7.8 million in market value) repurchased during the first quarter of 2005. There are 2,610,782 shares remaining for future repurchase under the program. The primary purpose of this stock repurchase program is to increase stockholder value. The Company intends to continue to repurchase shares of its common stock in open market or privately negotiated transactions, from time to time, depending upon market conditions and other factors. Additional information about stock repurchases is included in Part II, Item 2 of this Form 10-Q.

The Company declared dividends of $3.7 million in the first quarter of 2005, or $.065 per share. This represents a 51.2% increase over the $.043 per share declared in the first quarter of 2004. The quarterly dividend is payable on May 2, 2005 to stockholders of record on April 1, 2005.

Critical Accounting Policies

The preparation of the Company's consolidated condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an on-going basis, management evaluates these estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Historically, actual results have not been materially different from the Company's estimates. However, actual results may differ from these estimates under different assumptions or conditions.

The Company has identified the critical accounting policies used in determining estimates and assumptions in the amounts reported in its Management's Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the fiscal year ended January 1, 2005. Management believes there have been no changes in those critical accounting policies.

The information concerning quantitative and qualitative disclosures about market risk contained in the Company's Annual Report on Form 10-K for its fiscal year ended January 1, 2005, is incorporated herein by reference.

The Company faces market risk to the extent that changes in foreign currency exchange rates affect the Company's foreign assets, liabilities and inventory purchase commitments and to the extent that its long-term debt requirements are affected by changes in interest rates. The Company manages these risks by attempting to denominate contractual and other foreign arrangements in U.S. dollars and by maintaining a significant percentage of fixed-rate debt. The Company does not believe that there has been a material change in the nature of the Company's primary market risk

exposures, including the categories of market risk to which the Company is exposed and the particular markets that present the primary risk of loss to the Company. As of the date of this Form 10-Q Quarterly Report, the Company does not know of or expect there to be any material change in the general nature of its primary market risk exposure in the near term.

The methods used by the Company to manage its primary market risk exposures, as described in the sections of its annual report incorporated herein by reference in response to this item, have not changed materially during the current year. As of the date of this Form 10-Q Quarterly Report, the Company does not expect to change its methods used to manage its market risk exposures in the near term. However, the Company may change those methods in the future to adapt to changes in circumstances or to implement new techniques.

The Company's market risk exposure is mainly comprised of its vulnerability to changes in foreign currency exchange rates and interest rates. Prevailing rates and rate relationships in the future will be primarily determined by market factors that are outside of the Company's control. All information provided in response to this item consists of forward-looking statements. Reference is made to the section captioned "Forward-Looking Statements" at the beginning of this document for a discussion of the limitations on the Company's responsibility for such statements. For purposes of this item, "near term" means a period of time going forward up to one year from the date of the financial statements.

The Company applies SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS Nos. 137 and 138, when accounting for derivative instruments. These provisions require the Company to recognize all derivatives on the consolidated condensed balance sheets at fair value. Derivatives that are not hedges must be adjusted to fair value through earnings. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings.

The Company conducts wholesale operations outside of the United States in Europe and Canada where the functional currencies are primarily the British Pound, Canadian Dollar and euro. The Company utilizes foreign currency forward exchange contracts to manage the volatility associated with foreign currency inventory purchases made by non-U.S. wholesale operations in the normal course of business. At March 26, 2005 and March 27, 2004, the Company had outstanding forward currency exchange contracts to purchase $22.6 million and $31.0 million, respectively, of various currencies (principally U. S. dollars) with maturities ranging up to 280 days.

The Company also faces market risk to the extent that its products are produced in countries where certain labor, overhead and raw material costs are paid in foreign currencies, including the Chinese Yuan Renminbi. As a result, changes in the foreign currency exchange rates of these currencies could cause increases in the price of products which the Company purchases primarily in U.S. Dollars.

The Company also has production facilities in the Dominican Republic where financial statements are prepared in U.S. dollars as the functional currency; however, operating costs are paid in the local currency. Royalty revenue generated by the Company from certain third-party foreign licensees is calculated in the licensees' local currencies, but paid in U.S. dollars. Accordingly, the Company's earnings could be impacted as a result of exchange rate changes in 2005 and beyond.

An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on and as of the time of such evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic filings with the Securities and Exchange Commission. During the first quarter of 2005, the Company implemented its global Enterprise Resource Planning system (SAP) and warehouse management system (PkMS) for its Canadian operations. This upgrade resulted in one common platform for the Company's North American operations. In conjunction with this implementation, a centralized accounting function is also being established for certain processes across its branded Canadian operations. Other than the implementation of these systems and processes, there have been no changes during the quarter ended March 26, 2005 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.