Payless Comps Down 3%; Sales Up 3.3% for Jan…

Payless ShoeSource, Inc. reported that same-store sales decreased 3.0% during the four weeks ended January 29, 2005. Company sales totaled $138.6 million, a 3.3% increase from $134.1 million during fiscal January of last year.

For the fourth quarter, same-store sales decreased by 2.7%. Total sales for the fourth quarter 2004 were $629.1, compared with $644.4 million in fourth quarter 2003. Total sales for fiscal 2004 were $2.77 billion, compared with $2.78 billion during fiscal 2003. Same-store sales decreased 0.9% during fiscal 2004.

     Sales were as follows (unaudited):


                       JANUARY SALES (DOLLARS IN MILLIONS)

       Fiscal           Fiscal           Percent          Same-Store Sales**
        2004*            2003           Increase/             Percent
                                       (Decrease)        Increase/(Decrease)
       $138.6           $134.1             3.3%                (3.0)%


                     4TH QUARTER SALES (DOLLARS IN MILLIONS)

       Fiscal           Fiscal           Percent          Same-Store Sales**
        2004*            2003           Increase/             Percent
                                       (Decrease)        Increase/(Decrease)
       $629.1           $644.4            (2.4)%               (2.7)%


                     YEAR-TO-DATE SALES (DOLLARS IN BILLIONS)

       Fiscal           Fiscal           Percent          Same-Store Sales**
        2004*            2003           Increase/             Percent
                                       (Decrease)        Increase/(Decrease)
        $2.77            $2.78            (0.6)%               (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.
       Operations in the company's Latin American region (177 stores) and
       Japan are currently included in total company results on a one-month
       lag relative to results from other regions.  To facilitate this change,
       January 2004 excluded sales in Latin America.  Consistent with all
       months after January 2004, January 2005 sales include sales in the
       company's stores in Latin America and Japan from the previous month,
       (December 2004). Excluding these sales, total company sales in January
       2005 would have been less than the reported January 2004 sales.

    ** 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.  In addition, beginning in October, all Parade stores
       and the North American Payless ShoeSource stores that are part of the
       company's previously announced strategic initiatives are excluded from
       same-store sales results.  Revenues from these stores are included in
       the company's total sales until the stores close.  Third-party
       liquidation sales are recognized at the time the sale is made to the
       customer, are calculated based upon contractually guaranteed amounts
       pursuant to our agreements with liquidators and are net of associated
       fees.

Through targeted promotions and inventory receipt management, the company succeeded in its goal to end the year with its inventory appropriately positioned for Spring 2005. Based on initial estimates, the level of inventory per store at fiscal year-end 2004 is expected to be lower than fiscal year-end 2003, and the company has reduced its store count by approximately 8% since the end of fiscal 2003. In addition, the company’s financial condition remains strong. Long-term debt was unchanged in 2004 and the company had no borrowings on its Revolving Credit Facility at year-end.

In August 2004, the company announced a series of strategic initiatives as part of a plan designed to sharpen the company’s focus on its core business strategy, reduce expenses, accelerate decision-making, increase profitability, improve operating margin, and build value for shareowners over the long-term. The initiatives included exiting Parade, Peru and Chile; the closing of approximately 260 additional Payless ShoeSource stores; the reduction of wholesale businesses that provide no significant growth opportunity; and a reduction of the company’s expense structure.

The total costs relating to the strategic initiatives are likely to be near the low end of the previously disclosed range of $70 million to $80 million. The company expects to incur substantially all such costs in fiscal 2004. In accordance with Statement of Financial Accounting Standards No. 144, the company intends to treat certain operations associated with the strategic initiatives as discontinued operations in its financial statements for 2004, and will also report past performance accordingly.