Shareholders in Footstar Inc have filed a lawsuit against the footwear company claiming its reported financial results were misleading and inflated the company's stock price.

Their action, which was disclosed by law firm Milberg Weiss Bershad Hynes & Lerach LLP, followed last week's disclosure that Footstar's athletic shoe retailing unit had been understating accounts payable for the last two years - by as much as $35 million.

As a result, Footstar said it was withholding its third-quarter report and would restate results for the first nine months of 2002 and all of 2001.