Footstar to Exit Two Licensed Footwear Relationships; Company is Comfortable with First Call Consensus Estimate of $0.72 for Second Quarter.

Business Editors

Footstar, Inc. (NYSE:FTS) today announced that it plans to end two unprofitable licensed footwear relationships operated by its Meldisco division.

The Company will exit the Variety Wholesale Distributors operation at the end of the second quarter 2002, and will also cease operating the footwear departments in Steinmart stores no later than February 2003, when that contract expires. In connection with these actions, Footstar will record restructuring charges of approximately $11 million, net of taxes, or $0.54 per share, in the second quarter of 2002 related to inventory write-downs, asset impairments and severance expense.

Mickey Robinson, Chairman and Chief Executive Officer, commented, "Footstar is the largest licensed footwear operator in the nation, and we continue to execute our strategy of leveraging our capabilities in this area to generate future growth. Toward that end, we have extended our partnership with Federated Department Stores to operate in approximately 20 locations in addition to the 46 originally announced. In the case of the Variety and Steinmart relationships, which we assumed in our purchase of the J. Baker footwear businesses, we determined it was in the best interests of the Company and its shareholders to exit these operations, which are expected to lose approximately $0.05 per share in the first half of 2002. We expect this initiative to positively impact both profitability and working capital needs in the second half of the year."

June sales continue to be ahead of plan at Meldisco and on plan in the athletic division. Given current sales trends, Footstar is currently comfortable with First Call earnings estimates for the second quarter of $0.72 per share, before the effects of restructuring charges. The Company will report sales for the month ended June 29, 2002 on Monday, July 8, after the close of the market, due to the July 4th holiday.

The Company also announced that it has completed the adoption of Statement of Financial Accounting Standards No. 142, a new accounting requirement that changes the way companies account for goodwill and certain intangible assets. As a result of this change in accounting, the Company has eliminated all goodwill related to its purchase of the footwear assets of J. Baker, Inc. on February 3, 2001. The cumulative effect of the change in accounting is $18.2 million, net of taxes, or $0.89 per share and will be recorded, as required by GAAP, as a non-cash adjustment to earnings as of the first quarter of 2002.

Footstar, Inc. is a leading footwear retailer. The Company offers a broad assortment of branded athletic footwear and apparel through its two athletic concepts, Footaction and Just For Feet and their websites, www.footaction.com and www.justforfeet.com, and discount and family footwear through licensed footwear departments operated by Meldisco, including 2,082 in Kmart stores of which Kmart has a 49% equity interest. As of May 25, 2002, the Company operated 478 Footaction stores in 41 states, Puerto Rico, and the U.S. Virgin Islands, 93 Just For Feet superstores located predominantly in the Southern half of the country and 6,549 Meldisco licensed footwear departments across the country.

FORWARD-LOOKING STATEMENT AND DISCUSSION OF BUSINESS RISKS: The foregoing discussion contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 and is based on current expectations, assumptions, estimates and projections. Forward-looking statements may be identified by such forward-looking terminology as "currently expects", "anticipates", "will," and similar statements or variations of such terms including any discussion of earnings targets or earnings estimates. The retail footwear and apparel business is highly competitive and such forward-looking statements involve significant material known and unknown risks and uncertainties which may cause actual results to differ materially from such forward-looking statements, including the possible substantial impact on the Company's business of the bankruptcy proceeding commenced by Kmart Corporation (at which the Company currently has approximately 2,100 licensed footwear departments) and potential adverse developments in such proceeding including: failing to successfully reorganize the chain; any significant store closings effected by Kmart as part of such proceeding to the extent such closings have a material impact on our business; and the impact of any other plans or activities effected by Kmart in such proceeding. Certain other risks and uncertainties include, but are not limited to: closing adjustments made during the course of closing the quarter, integration of business units, the continued independence and financial health of the Company's other significant licensors and customers; consumer demand for footwear; unseasonable weather; consumer acceptance of the Company's merchandise mix; retail locations; product availability; the effect of competitive products and pricing; and existing retail economic conditions including the impact on consumer spending and consumer confidence from a slowing economy and the impact of a highly promotional retail environment. These and other important factors that may cause actual results to differ materially from such forward-looking statements are also included in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission as well as in other periodic reports filed by the Company with the Securities and Exchange Commission. You are urged to consider all such factors. In light of the uncertainty inherent in such forward-looking statements, you should not consider their inclusion to be a representation that such forward-looking matters will be achieved or that current trends are an indication of future results. The Company assumes no obligation for updating any such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.