It all goes back to our theme for this meeting, "Think, dream, work, grow." What does that mean?

Well, we need you to think. Not just about your accounts, or your quota or your sales calls on any given day but to think about ways to expand our overall business. Think creatively...open your mind to ideas that no one has ever thought of before. Share your thoughts...bounce ideas off the other people in this room today. Use our collective mind like an engine, to drive our brand ahead.

We need you to dream...to step outside the box of your everyday job and see things from a new perspective. Imagine where we as a brand could be, and then imagine ways you and everyone on our team can help get us there.

And then, we need you to work. Work to make your thoughts and dreams a reality...work as hard as you can to help us regain our leadership position.

The result of these three efforts? Growth. Growth is the final stage in our message, the payoff for all the thinking and dreaming and work. Growth for our brand, and growth for you as valuable, contributing members of the best children's team in the industry.

Growth, until we have achieved our vision: until we've recaptured our rightful position as the indisputably pre-eminent brand of children's shoes everywhere.

This past year we focused our energies on putting the foundation in place to leverage the power of this great brand and reach that goal. We focused on product innovation...on making the line more contemporary and adding quality features.

We focused on developing an image and message that's unique...an image that only we can own...an image that says to the consumer that they were not doing the right thing, unless they bought StrideRite shoes.

And most of all, we focused on having the right people in the right place at the right time to execute our game plan flawlessly. In other words, we focused on thinking, dreaming, and working, to ship shoes on time and to operate with integrity. Did we succeed?

Look at just a few of our overall accomplishments in the past year, and then you tell me. For one thing, shipments this year are on plan, and if we continue to execute well they may be ahead of plan.

Our margins are just slightly below plan year-to-date but are significantly better than last year.

We reduced our obsolescence exposure and had our earliest "at-once" availability ever. We enjoyed on-time delivery of our spring '96 and interim lines, and a new visual look that was also successfully delivered on time. And as of today, our inventories are exactly where we want them to be.

You took our plan, and you executed flawlessly. Looking around the room this morning, I see a number of people who took maximum advantage of every opportunity to think, and dream, and grow our brand.

People like Nate Plovsky and Vern Aisner, who rolled out 50 new concept shops at JC Penney, increasing sales in these stores 20% over last year. Nate and Vern, could you stand up for a minute? Your efforts were so successful that Penney's and StrideRite will have 300 by the first quarter of 1997. That's what we can accomplish when we think, and dream.

Nate and Vern, stay on your feet while I ask Jay Nannicelli to stand for a minute. Nate moved the production of our sandals to Mexico to improve the quality...and moved it all, without a hitch. Again, a thinker and a dreamer.

Gary Nohe and Don Senkovis, can you stand up, please? Gary and Don both saw spring '96 futures that looked like they'd be off..but who still drove at once so that their business was up over last year. Thinkers and dreamers? I see a roomful of them.

John Licata and Jim Rion, could you stand? Our year-to-date sales leaders at ___% and ___% respectively.

Carl Gravina, let me see you. Carl worked so hard with many of you to convert some of our own StrideRite retail store closings to dealers to the tune of 5 locations. And we're now forecasting a total of 16 new stores for 1996.

And finally, Dan Kelsey, can you get up? You worked for years to convert a BB dealer to StrideRite...until finally, this year, you succeeded.

Thinkers? Yes. Dreamers? Without a doubt. And most of all, workers. Thank you, gentlemen, for the year you've had. You're the best possible example, of how we're going to grow our brand from now on.

So the question is, how are we going to capitalize on this momentum in the fall of '96? Last time we were together I shared a quote from Jack Nichlaus with you, how before every shot he'd envision where he wanted the ball to be, and then concentrate on that vision throughout his stroke. We talked about doing the same thing for Fall '97...to envision future bookings as being ahead of last year, and then working to make that vision a reality.

Well, our Fall '96 bookings are up--that's right, you heard me correctly, I said up, over last year and just shy of our stretch goal. And even more significantly, you've accomplished this with fewer salespeople and with no increase in the number of doors. You don't have to tell me how much work that took.

In addition, our key programs are placed extremely well. Our new advertising from Toth, which has received rave reviews and will reach ____ mothers with children under the age of five will be executed as planned.

And the fall Hikers program is the real success story. We've already sold a quarter of a million pairs, and have a full 80,000 more pairs as back-ups.

That's great news, isn't it? And it just keeps getting better. Our Nordstrom anniversary orders are up over last year by more than 6,000 pairs. Mike Howard has orders that are double last year's from 10,000 pairs to 23,000.

And finally, our Fall '96 futures look like nothing but good news. [INSERT LIST OF REPS].

But that doesn't mean we don't still have a number of challenges ahead of us. Flawless execution is still, and will always be, key. As we all know, we haven't always executed as well as we might have during our back-to-school campaign.

We have to make sure that our inventory and warehouse capability matches the number of pairs we need to ship. To make sure that happens, Jay and Joe Barrel and Jeff Jones have put programs in place and are monitoring the situation carefully.

As a sales organization, we have to make sure our retailers have the assortment they need to meet consumer demand...and if they don't, we have to be there, and make those corrections.

We have to coordinate with marketing, and take advantage of our advertising campaigns. It's been a long time since we've advertised--in fact, none of us can say for sure what the impact will be. But we have to be ready. We have to think ahead about what's going to be hot, and what we can do to ride that wave.

And if I can just diverge into a short sidebar: in order to make plans, we have to manage and control returns. This is a recurring issue for us...and I know it's a balancing act, when you've got customers you want to please and a policy that basically says, "No returns." But again, think creatively.

That might mean working with your retailers, to help them move more merchandise.

It might mean taking some stock back, but replacing it with an equal number of pairs from inventory.

Whatever the solution, though, this is something we have to address..a situation, we have to control. And when I say we, I mean we: I absolutely need your help on this.

Having said all that, let's turn to spring of '97, where we're continuing to work towards our vision. If this year has been about anything, it's been about defining a standard of performance, and rebuilding our brand completely. Spring of '97 is going to be all about looking forward.

I saw a quote from Abraham Lincoln on a billboard the other day: "I may walk slowly," he said. "But I never walk back." Well, that's exactly where we are for next spring. We've put the pieces in place...we're walking forward...and believe me, there's no going back.

Our collective job right now is to take the brand to the next level.

[STORY]

How? Think...dream...work...and believe me, we're going to grow.

I've been using those four words all morning...and they're a perfect description of what we need to do in the year and years ahead. But think how perfect those words are for our consumers as well: for parents, who rely on our products for their children.

As a parent, you think about your children, and their welfare.

You dream about where they might go in their lives...about their dreams, and how you can help them make them come true.

You work, to give your children the things they need...work hard to give them guidance, and direction, and the sense of self-worth they need to survive in this world.

And sure enough, they grow. They grow into people, full of all the thoughts, and dreams, and hard work their parents have given them, every day of their lives.

If we do our jobs correctly, our brand can be an important part of those lives. We can grow our brand in direct proportion to our consumers' wants, and needs. And I don't mean only quantitative growth. To me, the most significant growth we can experience is quality growth...expanding our brand outward in ways none of us sitting in this room right now might imagine.

It's funny, but in some ways I think one of the reason we've been successful in the past is exactly why we've become complacent in the last few years. We're very good at what we do. We've done things so well for so long, we've forgotten how to think differently.

We've forgotten how to look for new approaches...new avenues to explore, new solutions to changing environments. We do something so well, we do it the same way a thousand times. But instead, why not look at the same thing, and find a thousand different approaches?

I remember reading about a company that held a weekly meeting whose sole purpose was to reward the person who had come up with the most creative idea that week. Not the most successful idea, or the idea everyone thought was the best. Simply, the most inventive approach to a problem. The most innovative angle. The one idea, that no one had thought of before.

[GENE WINTERS EXAMPLE]

Right now, we are a company that has become highly accomplished at vertical growth that's improved the way we do business. And don't get me wrong: we're going to have to continue to be competent here.

This spring we've provided you with plenty of ammunition for that exact purpose. We've introduced new products: Baby products, expanded sandal offerings, and improved styling in dress. Our Street Hot and an expanded Sperry line will help drive our vertical growth. And of course, all of it will be supported with the appropriate marketing and sales programs.

But to reestablish our leadership position, we need more than that. We need to grow horizontally as well...to expand into new markets, markets we may not even know exist.

In a few minutes you'll be hearing from Jerry Silverman, who will tell you first-hand about the seeds we're planting and the opportunities to expand into the international market. This is a market that we haven't even touched. And yet, when you actually get out there and ask people around the world about our brand, you find that we have a tremendously positive image.

That perception not only reinforces what we already know and makes us proud of our brand. But it also says something else: that there's a whole new world waiting out there for us...the perfect opportunity for horizontal growth. And yet an opportunity that until now, we didn't explore. In today's market, that is simply unacceptable.

Think...let's all of us think in new and creative ways. Let's put our imaginations to work and dream the biggest dreams we can. Let's work hard, and work together. And you know something? We're going to grow.

Over the next few days we'll be sharing with you even more of our plans and strategies for the coming year. But while we're together, and then into the coming weeks and months ahead, keep in your mind the idea of change...of changing our attitudes, and the way we approach our business.

Think...dream...work...and together we'll grow. We'll grow our brand...we'll grow your skills...and we'll be there with parents to watch their children grow, and remain an active and important part of their lives. Thank you.

And now, I'd like to introduce Jerry Silverman, who will fill us in on some of our international efforts. Jerry?

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