Payless August Comps Drop 6.9%; Announces Managment Changes

Payless ShoeSource same-store sales decreased 6.9% during the August reporting period, the four weeks ended August 28, 2004. Company sales totaled $218.0 million, a 6.4% decrease from $232.7 million during fiscal August of last year. Same-store sales decreased 0.2% during the first seven months of the fiscal year.

    Sales were as follows (unaudited):

                        AUGUST SALES (DOLLARS IN MILLIONS)
          Fiscal          Fiscal          Percent          Same-Store Sales*
          2004            2003            Increase/        Percent
                                          (Decrease)       Increase/(Decrease)
          $218.0          $232.7          (6.4)%           (6.9)%


                   YEAR-TO-DATE SALES (DOLLARS IN BILLIONS)
          Fiscal          Fiscal          Percent          Same-Store Sales*
          2004            2003            Increase/        Percent
                                          (Decrease)       Increase/(Decrease)
          $1.67           $1.66           0.4%             (0.2)%

     * 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 (211 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 also announced today a series of management and administrative
restructuring actions, as part of a plan announced on August 12, 2004. These
actions involve headcount reductions and position eliminations throughout the
company, reducing the company's administrative expenses by approximately
$12 million annually.

As part of the restructuring, on an interim basis, Mr. Steven J. Douglass
will assume the responsibilities of President, in addition to his duties as
Chairman and Chief Executive Officer of Payless ShoeSource, Inc. Mr. Duane
Cantrell will step down as President of the company effective today, and will
also resign from the company's board of directors. Mr. Cantrell joined Payless
ShoeSource in 1978. He has served as the company's President and as a director
since February 2002. All functions that had reported to Mr. Cantrell will
report to Mr. Douglass.

On August 12, 2004, the company announced a series of strategic
initiatives directed toward building long-term shareowner value. The strategic
initiatives include:

    -- The previously announced decision to sell or dispose of all 181 Parade
       stores, and related operations;
    -- The sale or disposal of all 32 Payless ShoeSource stores in Peru and
       Chile, and related operations;
    -- The closing of approximately 260 Payless ShoeSource stores, in addition
       to the approximately 230 stores that had originally been scheduled for
       closing or relocation as a part of the normal course of business in
       fiscal 2004;
    -- The reduction of wholesale businesses that provide no significant
       growth opportunity, and;
    -- A comprehensive review of the company's expense structure and
       appropriate reductions to improve profitability.

The actions announced today address management and administrative
positions relating to all of the strategic initiatives.

“Payless ShoeSource is committed to serving the interests of our
shareowners by building long-term shareowner value through improved execution
of our core business strategy. The new reporting structure will accelerate
decision-making, and enable more effective execution of our strategy,” said
Mr. Douglass. “It is part of a plan designed to sharpen our focus on our core
business strategy, reduce expenses, increase profitability, improve our
company's operating margin and build value for our shareowners over the long
term.”

“We remain committed to our stated objective of 30% gross margin for
fiscal 2004. However, 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. If the negative sales trend from July and August
continues, it will be difficult to attain our fiscal 2004 gross margin
objective. The company is focused on improving its sales performance through
execution of its 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.”

“We are grateful to all associates for their contributions to the
company's success over the years. In particular, we thank Duane Cantrell for
his twenty-six years of distinguished service on behalf of Payless
ShoeSource.”