Shoe retailer Bakers Footwear Group has posted net income of US$0.5m for the fourth quarter ended 31 January, compared to $7.3m in the same period last year, amid a highly promotional retail environment.

Bakers also said the fourth quarter of last year had included a gain of $4.8m from the early termination of an operating lease.

However, the company has also received an audit report from an independent registered public accounting firm raising "substantial doubt about whether the company can continue as a going concern", it said.

Fourth quarter net sales were $55.5m, an increase of 1.3% from $54.7m for the thirteen-week period ended 2 February 2008. Same-store sales increased 3.6%, compared to a decrease of 6.8% in the prior-year period.

For the fiscal year ended January 2009, Bakers' net sales were $183.7m, compared to $186.3m for the fifty-two weeks ended 2 February 2008. Comparable store sales increased 0.5% and net loss was $15.0m, compared to a net loss of $17.7m, or $2.70 per share in fiscal 2007 which included a gain of $4.8m, or $0.73 per share related to the early termination of a lease.

The company, which sells shoes to young women, said that for the first ten weeks of fiscal 2009 net sales increased 5.9% to $34.0m, reflecting a same-store sales increase of 7.5%.

Peter Edison, chairman and chief executive officer of Bakers Footwear Group, said: "We are pleased to report positive operating performance in the fourth quarter of fiscal 2008 that included a 3.6% increase in comparable store sales, an operating profit and net income.

"Our performance, however, came in below our expectations at the beginning of the quarter due to the highly promotional retail environment that began in mid-December in response to sluggish holiday sales."

Pursuant to Nasdaq Marketplace Rule 5250(b)(2) (formerly Rule 4350(b)(1)(B)), Bakers said despite its strong disagreement it had received the audit report on its fiscal 2008 financial statements from the accountants and would file it as part of the company's Annual Report on Form 10-K with the Securities and Exchange Commission.

Edison added: "Although we are disappointed with our auditors' report that will be filed in our Form 10-K, we understand that their professional standards limit their ability to assume continued positive sales and operating trends. We strongly and respectfully disagree with this view of our prospects.

"We foresee positive sales trends continuing during fiscal 2009. In addition, we believe Bank of America's decision to amend and extend our credit agreement demonstrates their confidence in and continued support for Bakers. Furthermore, our vendors and landlords have also expressed support for the company, its business and its management."