Payless July Comps Drop 6.5%

Payless ShoeSource same-store sales decreased 6.5% during the July reporting period, the four weeks ended July 31, 2004. Company sales totaled $192.0 million, a 5.7 percent decrease from $203.6 million during fiscal July of last year.

Sales for the second quarter were $727.9 million, a 0.5 percent decrease from $731.5 million in the second quarter 2003. Same-store sales decreased 0.9 percent during the second quarter.

Same-store sales increased 0.9 percent during the first six months of the fiscal year.

   Sales were as follows (unaudited):


                       JULY SALES (DOLLARS IN MILLIONS)

       Fiscal          Fiscal          Percent           Same-Store Sales*
       2004            2003            Increase/         Percent
                                       (Decrease)        Increase/(Decrease)

       $192.0          $203.6          (5.7)%            (6.5)%


                 2nd QUARTER SALES (DOLLARS IN MILLIONS)

       Fiscal          Fiscal          Percent           Same-Store Sales*
       2004            2003            Increase/         Percent
                                       (Decrease)        Increase/(Decrease)

       $727.9          $731.5          (0.5)%            (0.9)%


                 YEAR-TO-DATE SALES (DOLLARS IN BILLIONS)

       Fiscal          Fiscal          Percent           Same-Store Sales*
       2004            2003            Increase/         Percent
                                       (Decrease)        Increase/(Decrease)

       $1.45           $1.43           1.4%              0.9%


  *  Effective with the end of 2003, the fiscal year for operations in the
     company's Latin American region is based on a December 31 year-end.
     Stores in the company's Latin American region (212 stores) are included
     in total company results on a one-month lag relative to results from
     other regions.

  ** Same-store sales represent sales of those stores in the United States,
     Canada, Puerto Rico, Guam and Saipan that were open during both
     periods.  Same-store-sales exclude stores in the company's Latin
     American region.

“The company was less promotional in the second quarter 2004 than it was in the second quarter 2003. Despite the disappointing sales performance in July, it is likely that second quarter 2004 gross margin will show improvement relative to the same period last year,” said Steven J. Douglass, Chairman and Chief Executive Officer of Payless ShoeSource, Inc. “We remain committed to our stated objective of 30% gross margin for fiscal 2004. To accomplish this objective, the company must achieve low-single-digit positive same store sales on a consistent basis for the remainder of the year. We will continue to focus on improved execution of our core business strategy: to be the Merchandise Authority in value-priced footwear and accessories through merchandise that is Right, Distinctive and Targeted for our customers.”

Due to the possible financial impact of strategic alternatives in the second quarter, the company is precluded from providing specific earnings guidance for the period. The company intends to announce second quarter results on August 12, 2004.