In response to Ames Department Stores' decision to liquidate and close all of its stores, Footstar Inc announced on Wednesday it will be winding down its footwear departments in Ames stores and recording an allowance for bad debt of $9.2 million in the second quarter ended 29 June 2002.

Footstar acquired the license to operate footwear departments in Ames when it purchased the J Baker footwear business in February 2001. Currently, Footstar subsidiaries operate licensed footwear departments within each of Ames' 327 stores. The Footstar subsidiaries own all footwear inventories within these departments and are responsible for their staffing.

According to Ames, going-out-of-business sales are expected to begin sometime during the third quarter, with all stores expected to be closed by the end of 2002.

Footstar is currently in the process of developing its plans to liquidate the related inventory and exit the departments.

As reported in Footstar's latest 10-Q, the footwear departments located in Ames stores generated $43.9 million in sales, or 4 per cent of Footstar's total sales, for the six months ended 29 June 2002. These licensed departments had an operating loss of approximately $0.5 million, before bad debt expense, for the same period.