Payless ShoeSource Plans Dual-DC Network, Will Close Topeka Facility

As part of a strategy to enhance logistics efficiency and speed-to-market, Payless ShoeSource, Inc. (Topeka, Kans., www.payless.com) plans to open a new 600,000-sq.-ft. distribution center east of the Mississippi river at a to-be-determined location in the summer 2008. Coupled with previously announced plans for a new 400,000-sq.-ft. distribution center in Redlands, Calif., due to open this summer, Payless will shift from it's single, 850,000 sq.-ft. distribution center in Topeka, Kan., to a dual-facility distribution center model.

"This initiative is a strategic step to enhance Payless' supply chain operation, enabling us to more quickly deliver ontrend, targeted product to our stores and customers, a key component of our business strategy," said Matt Rubel, company CEO and president, in a statement. "The dual-center model is a prudent long-term investment in the company's infrastructure, which will benefit customers and return value to long-term shareholders of Payless stock."

Payless stores are heavily clustered in the more populated coasts and borders of the U.S. With a distribution center on the west coast and another in the East, the new supply chain model is reportedly better aligned with the company's store geography. The new distribution model will also provide redundancy and enhance the company's ability to replenish product, increasing in-stock positions. The company's capital spending for this investment will be approximately $77 million from 2006 through 2008. Once the two new distribution centers are operational, the company plans to close its Topeka facility, which will affect 450-550 jobs.

As of the end of third quarter 2006, Payless had 4,574 stores located in the United States, Canada, Puerto Rico, and Central and South America. The company contracts with a third-party logistics provider for a distribution center in Colon, Panama, which serves the product needs of its stores in South and Central America.

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