Yes, her hat is made out of bread. And that other lady is wearing baby dolls.
The woman in this photograph is a "banner lady."
Banner ladies modeled and were photographed in the things they sold.
The lady in this photo is advertising a bakery.
Via: luminous-lint.com
Here are some other banner ladies:
Hardware
Via: luminous-lint.com
Blacksmith
Via: luminous-lint.com