I can remember taking my kids for their first pair of shoes at Stride Rite (NYSE:SRR). The steps of my babies were a great deal more exciting, however, than the company's uninspiring Keds-related sales.

Stride Rite reported second-quarter earnings today that were hurt by the worn sneaker that continues to be its Keds line. The company earned $0.30 per share, which was one cent below expectations but two cents better than last year's $0.28. Stride Rite cited strength in the Keds Microstretch brand, but other Keds styles didn't fare as well.

Because of the slower-than-expected Keds turnaround, the company has lowered its fiscal 2004 guidance to $0.65 from $0.68 per share (although it should be noted that the lone analyst estimate was $0.67 a share).

The Fool previously reported Stride Rite's stumbles, but I now see some positive developments for a corporate shoe looking to tie its laces. Sales grew 7% in the second quarter, anchored by strong results turned in by the 240 Stride Rite retail stores (up 10%), sales of Tommy Hilfiger (NYSE:TOM) footwear (a 19% increase), and a 26% gain in international sales (in Asia and Latin America). Also, the company's balance sheet continues to be one of its most attractive qualities. With $80 million in cash, Stride Rite continued to buy back its stock (2 million shares at a cost of $21 million) in the second quarter.

The shoemaker and peddler is trying to turn around its Keds operations in the face of stiff competition from rivals such as Brown Shoe (NYSE:BWS), Nike (NYSE:NKE), and Reebok (NYSE:RBK). Stride Rite has hired a new president for its Keds line and is hoping that this and other changes will turn baby steps into long strides.

I see Stride Rite as being fairly valued at this time, based on its shares trading at 14 times the fiscal 2005 estimate of $0.73; the company's single-digit growth rate is balanced by the company's willingness to make changes and its very strong balance sheet.

Reebok, a Keds and Stride Rite competitor, is a Motley Fool Stock Advisor recommendation. To learn more, subscribe and get a six-month, money-back guarantee.

Fool contributor Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.