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ST. LOUIS-Bakers Footwear Group Inc. has reported continuing disappointment in sales for the first fiscal quarter of this year, and the slide continues into May. First-quarter comp-store sales dropped 9.3% in the 13-week quarter ended May 5, and, during a conference call, management said May comps were down 15.1%.

Expressing “disappointment” and “lower than expected sales,” Peter Edison, chairman and CEO of the locally based 258-unit chain, said the first-quarter performance “reflected a lack of enthusiasm for our fashion footwear by our core customers and an unfavorable response to our spring assortments across our key fashion categories.”

Acknowledging a continuing slide in May, Edison said, “We hope to show improvement in the fall season, as our efforts to provide compelling fall/holiday assortments while maintaining tight management of inventory and expenses bear fruit.”

Inventories did tighten during first quarter, he said. By the end of the quarter they were down 1.4% from the same quarter a year ago, despite the addition of 13 net new units since the same quarter of 2006.

The company opened six new stores during this year’s opening quarter. Management said it is on track to open between eight to 10 overall this year and continues to target an eventual 600 units.

Four units were remodeled this spring, “and that’s all we’re announcing,” Edison said. He added that remodeled units this spring outperformed others by 15%.

Asked by an analyst during the call what else was needed, Edison responded, “Yea, we had the shoes that were fashion right, but this year’s fashion run wasn’t compelling to the public.”

The brightest spot in the quarter was internet sales, which rose 38.6% this opening quarter compared with the same quarter a year ago. In addition, the company ramped up its catalog efforts. It mailed two catalogs in first quarter, versus one in the same quarter a year ago, and its catalog circulation has nearly doubled to 846,000 customers.

Edison said the company is focused on “bringing back flair” along with a more aggressive approach to pricing. It will continue this strategy, Edison said, “despite rocky results.”

First-quarter sales fell just 1% to $49.3 million, compared with the year-ago quarter. Operating cash flow was negative. Management says it anticipates a net loss of between $1.6 million and $3.3 million for fiscal 2007. This compares with a net loss of $1.5 million in fiscal 2006.

At the same time it released first-quarter results, Bakers also announced the private placement of $4 million in convertible debentures due June 30, 2102 for net proceeds of about $3.5 million. The debentures are also convertible to 444,444 shares of common stock if the share price reaches $9. This represents about 7% of total outstanding shares.

BKRS stock on the Nasdaq plummeted nearly 13.3% to $7.20 a share on the day of the conference call. This compares with a 52-week trading range of between $15.75 a share and $6.81 a share.

The mall-based retailer focuses on women between the ages of 16 and 35 under the Bakers brand and on men and women between the ages of 17 and 29 under its Wild Wear brand. It sells private label and national brand dress, casual and sports whose, sandals and accessories.

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