<PAGE>
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549
                            FORM 10-K
(Mark one)
[X]       ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934   
For the fiscal year ended February 1, 1997
                                OR
[  ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________   
                        
                  Commission File Number 1-11633

                     PAYLESS SHOESOURCE, INC.
      (Exact name of registrant as specified in its charter)

           Missouri                          48-0674097
(State or other jurisdiction of            (I.R.S. Employer
incorporation or organization)          Identification Number)

3231 Southeast Sixth Street, Topeka, Kansas        66607-2207
(Address of principal executive offices)            (Zip Code)

                          (913) 233-5171
                 (Registrant's telephone number,
                       including area code)

Securities registered pursuant to Section 12(b) of the Act:

                                        Name of each exchange
Title of each class                      on which registered
-------------------                     -----------------------
Common Stock, par value $.01 per share  New York Stock Exchange
Preferred stock purchase rights         New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

                         (Title of Class)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.                   Yes   X    No       
                                           ------    ------

Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.  [ x ]


The aggregate market value of registrant's common stock held by
non-affiliates based on the closing price of $40.50 on April 14,
1997 was $1,616,745,218.

<PAGE>
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
39,919,635 shares of common stock, $.01 par value, as of April 14,
1997.

Documents incorporated by reference:
1.  Portions of Registrant's 1996 Annual Report to Shareowners are
    incorporated into Part II.

2.  Portions of Registrant's 1997 Proxy Statement for the Annual 
    Meeting to be held on May 23, 1997, are incorporated into Part 
    III.


                              PART I

Item 1.  Business
-----------------

General

Payless ShoeSource, Inc. ("Payless" or "Company") is the largest
family footwear retailer in the United States with more than $2.3
billion in sales in 1996. The Company sold approximately 195
million pairs of shoes in 1996, and served more than 130 million
customers. 

As of February 1, 1997, the Company operated 4,236 Payless stores
in 50 states, the District of Columbia, Puerto Rico and the U.S.
Virgin Islands. The Company's stores feature fashionable, quality
footwear for men, women and children, including athletic, casual,
dress, sandals, work boots and slippers.
Recent Developments 

During 1996, the Company opened 171 new Payless stores and closed
484 Payless stores. The Company opened 4 new Payless stores in
Alaska, the only state where the Company had not previously
operated any facilities.  The Company also announced the planned
open market repurchase, pursuant to Rule 10b-18 of the Securities
Exchange Act of 1934, of up to $150 million of common stock during
1997-98, contingent upon receipt of a favorable ruling from the
Internal Revenue Service and market conditions.  The favorable
ruling was subsequently received on April 8, 1997. In addition, the
Company completed a repurchase of 460,000 shares of its common
stock in 1996.  As discussed below, in late 1996 the Company
initiated the purchase of the Parade of Shoes division of J. Baker,
Inc.,  which consisted of 186 stores operating in 14 states.  This
transaction was consummated in March, 1997.  

History

The Company was founded in Topeka, Kansas in 1956 with a strategy
of selling low cost, high quality family footwear on a self-service
basis. In 1962, Volume Distributors, as the Company was known at
the time, became a public company and its shares were registered on
the New York Stock Exchange. In 1979, the Company (then called


                                2
<PAGE>
"Volume Shoe Corporation") was acquired by The May Department
Stores Company of St. Louis, Missouri. The Company changed its name
to Payless ShoeSource, Inc. in 1991. On May 4, 1996, Payless became
an independent company as a result of its spin-off from The May
Department Stores Company.   Payless is traded on the New York
Stock Exchange under the symbol "PSS." 
   
Payless Stores

The average size of the Company's Payless stores is 3,400 square
feet.   Each store carries approximately 10,000 pairs of shoes and
more than 600 styles.  Payless stores operate in a variety of real
estate venues formats, including shopping malls, central business
districts, free-standing buildings and strip centers.  Of the 4,236
Payless locations open at the end of fiscal 1996, 748 incorporated
a concept called "Payless Kids" which consists of an additional
approximately 1,000 square feet of selling space devoted to an
expanded assortment of children's shoes. These stores are located
throughout the country and include wider aisles, children-friendly
seating and an entertainment center for children.
  
The Company's Payless stores operate successfully in rural,
suburban and urban environments.  The 10 states with the largest
concentrations of the Company's Payless stores are identified
below:
                                        
                                  No. of 
                                  Payless
          State                   Stores
          -----                   -------

          California                 654          
          Texas                      368
          Florida                    282
          New York                   267
          Illinois                   196
          Pennsylvania               196
          Ohio                       187
          Michigan                   154
          New Jersey                 116
          Washington                 106 
                                   
          Other                    1,712     

          Total                    4,236

The Company's Payless stores are highly automated, each with an
electronic point of sale register and a back office computer which
not only records transactions from the register, but also serves
many other store supporting functions including price look-up,
accumulation of associate hours worked and communications with the
Company's headquarters in Topeka, Kansas.  Store associates receive
regular weekly communications from the Company's headquarters
describing promotional and display requirements.




                                3
<PAGE>
The Company's Payless retail operations are directed centrally by
a senior officer and small support staff.  The retail operations
organization is subdivided into six divisions headquartered in the
cities of Atlanta, Baltimore, Chicago, Dallas, Denver and Los
Angeles.  Divisions are directed by a vice president, two to four
operations directors and a small support staff.
Each Payless store has a manager and approximately five associates. 
The stores are organized into districts.  District managers, to
whom the store managers report, themselves report to the division
offices and have full financial responsibility for the stores in
their district.  Division offices also have loss prevention and
inventory control functions.  Human resources, merchandising
support and other more general support services, are provided from
the Company's headquarters.  


Parade of Shoes Stores

The Company's Parade of Shoes division, which was acquired in
March, 1997, from J. Baker, Inc., of Canton, Massachusetts,
emphasizes the retail sale of quality, primarily leather, women's
shoes. The Company operates the 186 Parade of Shoes store chain as
a division separate from the Payless chain. J. Baker reported sales
for the chain of $123 million in 1996.

Parade of Shoes stores are self-service and feature fashionable
women's dress, casual and athletic footwear priced in the $20 to
$40/pair range. Major markets include Boston, New York City,
Chicago, Philadelphia and Washington, D.C.  The average size of a
Parade of Shoes store is 2,300 square feet.  These stores operate
in a variety of real estate venues including shopping malls,
central business districts, free-standing buildings and strip
centers.
   
Employees

During 1996, the Company's average number of employees was
approximately 24,000, including approximately 13,000 full-time
associates and 11,000 part-time associates.  Approximately 650 of
the Company's distribution center associates are covered by
collective bargaining agreements.  Management believes it has a
good relationship with all employees.
  
The Company is led by a team of senior management executives who
have an average of 16 years of retail industry experience,
including an average of eight years with the Company.

Products

The Company's Payless stores offer a broad assortment of
fashionable footwear to meet the needs of its customers including
basic, seasonal and fashion shoes in dress, casual, athletic and
work boot categories. Shoes are constructed with leather, canvas
and man-made materials. Styling is updated regularly to keep pace
with proven fashion trends.  During fiscal 1996, the Company's
Payless shoes sold at an average retail price of $11.38/pair, with


                                4
<PAGE>
one-third of its women's footwear and two-thirds of its children's
footwear selling at $9.99 or less.  In addition to shoes, the
Company's stores offer accessories, including handbags, shoe polish
and hosiery.


The Company's merchandising effort is led by the President and
three general merchandise managers with an average of 24 years of
retail experience.  They direct teams of buyers, planners and
distributors that interact with vendors, agents and factory
representatives to design, select, produce, inspect and distribute
footwear and accessories for the Company.  The Company believes
that it has good relationships with its vendors.

Customers

The Company sells footwear to women, men and children of all age
groups and from households with incomes that represent
approximately 85% of the United States population. The Company has
significant market penetration with its target customers: women
between the ages of 18 and 64. The Company believes that more than
40% of its target customers, regardless of household income,
purchased at least one pair of shoes from the Company last year.
The Company maintains a leadership position in the children's
category as well, selling more pairs of children's shoes than any
other U.S. footwear retailer.
   
Competition

The Company operates in a highly competitive retail market
competing primarily with national and regional discount mass-merchandisers,
as well as with other self-service discount shoe
stores and off-price outlet stores.  Competition is based on
product selection and quality, availability, price, store location,
customer service and efficient promotional activities.  The Company
has successfully operated in its markets with each of these
segments of retailing for many years and has continued to capture
increased market share by offering a wider selection of fashionable
styles and favorable prices in conveniently located stores;
however, the Company is facing increased competition from certain
national discount mass-merchandisers.

Seasonality

The retail footwear market is characterized by four high volume
seasons: Easter, early Summer, back-to-school and Christmas. The
Company must increase inventory levels during these periods to
support the increased demand for seasonal styles.  Unseasonable
weather patterns may affect planned sales of seasonal products such
as sandals and boots.   

Purchasing

The Company utilizes a network of vendors and factories in 13
foreign countries and the United States to procure its products
which are manufactured to meet the Company's specifications and
standards.  The strength of the Company's relationships with
vendors and factories, some dating back over 40 years, has allowed
                                5
<PAGE>
the Company to adapt quickly its sourcing strategies to reflect
changing political and economic environments.  On several occasions
over the past years, many of the Company's vendors and factory
owners have played significant roles in developing production in
new factories and in new countries without compromising production
capacity or product quality.  Factories in the People's Republic of
China ("China") are a source of approximately 80% of the Company's
merchandise. The Company does not purchase "seconds" or "overruns"
and does not own any manufacturing facilities.  The Company closely
integrates its merchandise purchasing requirements with various
manufacturers through its sourcing organization which has offices
in Topeka, Kansas, and in Taiwan, China and Brazil.  Management
believes it has good relationships with its suppliers.

On a worldwide basis, approximately two-thirds of the Company's
merchandise is acquired through a network of third-party vendors. 
Payless ShoeSource International, the Company's Taipei, Taiwan
office, arranges directly with factories for the design, selection,
production management, inspection and  distribution of
approximately one-third of the shoes acquired for the Company.  

Risks inherent in foreign manufacturing (i.e., manufacturing
outside the United States) include economic and political
instability, transportation delays and interruptions, restrictive
actions by foreign governments, the laws and policies of the United
States affecting importation of goods, including duties, quotas and
taxes, trade and foreign tax laws and fluctuations in currency
exchange rates.  While the Company has not historically experienced
material adverse effects from these risks, there is no assurance
that in the future these risks will not result in increased costs
and delays or disruption in product deliveries that could cause
loss of revenue and damage to customer relationships.

China currently enjoys "most favored nation" ("MFN") status under
United States tariff laws, which provides the most favorable
category of United States import duties. China's MFN status is
annually reviewed by Congress.  Extension of this status is subject
to political uncertainties.  The loss of MFN status for China would
likely result in substantially increased costs to the Company in
the purchase of merchandise from China  until the Company could
arrange to shift its merchandise requirements to alternative
manufacturers in other countries.  The Company believes, however,
that its competitors in the footwear industry would be similarly
affected.

Quality Assurance

The Company's quality assurance organization sets standards and
specifications for product performance and appearance.  It
communicates those standards and specifications through its
copyrighted quality assurance manual.  The Company stands behind
the quality of the shoes it sells to its customers by permitting
return of purchased merchandise with proper documentation.





                                6
<PAGE>
The quality assurance organization also provides technical design
support for the Company's direct purchasing function.  It is
responsible for review and approval of vendor and factory technical
design, for  worldwide laboratory testing of materials and
components, and for performing in-factory product inspections to
ensure that materials and factory production techniques are
consistent with Company specifications.  The Company locates its
field inspection personnel close to the factories and freight
consolidation facilities it uses throughout the world.

Production Management

The production management organization manages an ongoing process
to qualify and approve new factories, while continually assessing
existing factory service and quality of performance.  New factories
must meet specified quality standards for shoe production and
minimum capacity requirements.  They must also agree to the
Company's production control processes and certify that neither
they nor their suppliers use forced or child labor.  Factory
performance must continually improve or the factory runs the risk
of being removed from the list of approved factories.  The
production management organization utilizes a unique, internally
developed production control process by which the Company is
electronically linked to its factories and vendors.  This process
is designed to ensure on-time deliveries of merchandise with
minimum lead time and without unnecessary costs.

The Company believes that maintaining strong factory relationships,
improving key factory performance factors and improving factory
profitability is critical to long-term sourcing stability.  Its
manufacturing services group, based in Asia, provides direction and
leadership to key factories in the areas of overall productivity
improvement and lead time reduction.

Merchandise Distribution

The Company believes that its distribution system provides it a 
competitive advantage.  The Company's merchandise distribution
teams are able to track shoes by the pair from order placement
through sale to the customer by the use of perpetual inventory,
product planning and retail price management systems.  These
systems are maintained by experienced information systems personnel
and are enhanced regularly to improve the product distribution
process.  Distribution analysts review sales and inventory by size
and style to maintain availability of product within the Company's
stores.

The Company operates a single 765,000 square foot distribution
center in Topeka, Kansas, capable of replenishing in-store product
levels by style, color and size.  This facility operates seven
days-a-week and has sufficient capacity to support more than 5,000
stores.  Management believes this is one of the most highly-automated
and cost-efficient distribution facilities in the
industry.  Stores receive product at least once a week, maintaining
a constant flow of fresh and replenished merchandise.   



                                7
<PAGE>
Industry Segments

The retail footwear industry can be divided into high, moderate and
value-priced segments, and is dominated by the Company and national
discount mass-merchandisers in the value-priced segment.  The high
priced segment is controlled by department stores.  The moderate
priced segment, which is dominated by specialty shoe chains and
mass merchants, is declining, in part due to improved product
quality in the value priced segment and price competition from the
high priced segment.
                                                                        
Based on industry data, the United States footwear market is
estimated to be $33 billion and one billion pairs, and has stayed
relatively flat over the past several years.  The value-priced
segment as a percent of the total pairs has more than doubled over
the past 15 years.  Industry data suggests that the quality offered
in the value priced segment has improved significantly over the
last 15 years, causing the doubling of this segment's share of the
market.  

The Company considers itself part of the low-priced segment of the
footwear industry. In 1996, the Company's share of the estimated
$33 billion United States footwear market was 7 percent; this share
has grown consistently over the past four decades.



Trademarks

The Company owns certain trademarks which it uses in its business,
including "Payless," "Payless ShoeSource," "Payless Kids," and
"Parade of Shoes."  The Company owns all rights to the yellow and
orange logo used in its Payless ShoeSource signs and advertising.
In the United States, the Company has registered over 100 key marks
and owns over 50 common law marks under which it markets private
label merchandise in its Payless ShoeSource stores and owns over 
30 registered and common law marks under which it markets private
label merchandise in its Parade of Shoes stores.  All of the
Company's registered trademarks may be renewed indefinitely.
   
Marketing

The Company's marketing efforts are multi-dimensional, including
nationally broadcast television advertising, national magazine 
advertisements, local market radio and newspaper inserts in support
of major promotional periods. In addition to media support, the
Company utilizes in-store promotional materials, including posters,
signs and point of sale items.  Also, the Company advertises its
business through promotional funds, media funds, merchants'
associations and similar efforts offered by various landlords from
whom the Company leases its stores.

The Company's marketing staff is augmented by a full-service advertising
concern that provides creative services, media purchase and consumer
research.



                                8
<PAGE>
Environment

Compliance with federal, state and local provisions which have been
enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the
environment, has not had, and is not expected to have, a material
effect on capital expenditures, earnings or the competitive
position of the Company.

Government Contracts

No material portion of the Company's business is subject to
renegotiation of profits or termination of contracts or
subcontracts at the election of the U.S. government. 

Directors of the Company

Listed below are the names and principal occupations of the
Company's Directors:

     Name                         Principal Occupation 
     ----                         --------------------

Steven J. Douglass         Chairman of the Board and Chief
                           Executive Officer  of the Company
Howard R. Fricke           Chairman of the Board, President and
                           Chief Executive Officer of The
                           Security Benefit Group of Companies
                           (life and other insurance)
Thomas A. Hays             Retired, formerly Deputy Chairman of
                           The May Department Stores Company
Richard A. Jolosky         President of the Company
Michael E. Murphy          Vice Chairman and Chief Administrative
                           Officer of Sara Lee Corporation (food
                           products)
Robert L. Stark            Dean of The Regents Center at the
                           University of Kansas

Executive Officers of the Company  

Listed below are the names and ages of the executive officers of
the Company and offices held by them with the Company.

     Name                Age            Position and Title
     ----                ---            ------------------

Steven J. Douglass       47        Chairman of the Board and Chief
                                   Executive Officer
Richard A. Jolosky       62        President and Director of the
                                   Company
Duane L. Cantrell        41        Executive Vice President-Retail
                                   Operations
Bryan P. Collins         43        Senior Vice President and
                                   Division Director for Parade of
                                   Shoes
Stephen Farley           42        Senior Vice President-
                                   Marketing

                                9
<PAGE>
Gerald F. Kelly, Jr.     49        Senior Vice President-Logistics/
                                   Information Services
Harris Mustafa           43        Senior Vice President-Merchandise
                                   Distribution
Jed L. Norden            46        Senior Vice President-Human
                                   Resources
Ullrich E. Porzig        51        Senior Vice President and Chief
                                   Financial Officer
William J. Rainey        50        Senior Vice President, General
                                   Counsel and Secretary
Thomas L. Rinehart       42        Senior Vice President and
                                   General Merchandise Manager-Men's
Gary M. Stone            48        Senior Vice President-Store
                                   Development
Larry M. Strecker        38        Senior Vice President of the
                                   Company and Managing Director
                                   of Payless ShoeSource
                                   International
Michael S. Wilkes        43        Senior Vice President and
                                   General Merchandise Manager-Children's

Steven J. Douglass has served as Chairman of the Board, Chief
Executive Officer and Director of the Company since May, 1996, the
date on which the Company's shares were distributed in a spin-off
by The May Department Stores Company to its shareowners.  Mr.
Douglass has been Chairman and Chief Executive Officer of the
Company since April, 1995.  He joined the Company in 1993 and
served as Senior Vice President-Director of Retail Operations from
1993 to January, 1995 and as Executive Vice President-Director of
Retail Operations from January, 1995 to April, 1995.  Prior to his
association with the Company, Mr. Douglass held several positions
at divisions of May, serving as Chairman of May Company, Ohio
(1990-1993) and Senior Vice President and Chief Financial Officer
of  J.W. Robinsons (1986-1990).

Richard A. Jolosky has served as President of the Company since
January, 1996.  He initially joined the Company in September, 1982,
serving as Executive Vice President-Merchandising (1982-1984) and
then as President (1985-1988).  Prior to rejoining the Company in
1996, Mr. Jolosky was President and Chief Executive Officer of
Silverman Jewelry Company (1995-1996), and Chief Executive Officer
of the Richard Allen Company (1992-1995).    Mr. Jolosky has served
as a Director of the Company since May, 1996.

Duane L. Cantrell has served as Executive Vice President-Retail
Operations since April, 1997 and as Senior Vice President-Retail
Operations (1995-1997).  He was the Company's Senior Vice
President-Merchandise Distribution and Planning (1992-1995) and
Senior Vice President-Merchandise Distribution (1990-1992).  Mr.
Cantrell has been employed by the Company since 1978.

Bryan P. Collins has served as Senior Vice President and Division
Director for Parade of Shoes since December, 1996.  Prior to that
he was Senior Vice President and General Merchandise Manager-Women's
since January, 1994.  He also served the Company as Senior



                                10
<PAGE>
Vice President-General Merchandise Manager-Women's Seasonal/Leisure
(October, 1991- January, 1994).   Mr. Collins has been employed by
the Company since 1991 and was previously employed by the Company
(1975-1985).

Stephen Farley has served as Senior Vice President-Marketing since
July, 1994.  Prior to that he was Vice President-Marketing (1993-1994)
and Vice President-Advertising (1992-1993).  Prior to joining
the Company, Mr. Farley was employed by Earl Palmer Brown as
Executive Vice President of Client Services (1989-1992).

Gerald F. Kelly, Jr. has served as Senior Vice President-Logistics/
Information Services since February, 1996.  Prior to that
he was Senior Vice President-Information Services and Chief 
Financial Officer (1990-1996) and Senior Vice President-Information
Services (1986-1990).

Harris Mustafa has served as Senior Vice President-Merchandise
Distribution since May, 1995.  Prior to that he was Vice President-
Financial Planning/Purchasing (1990-1995).  Mr. Mustafa has been
employed by the Company since 1987.

Jed L. Norden has served as Senior Vice President-Human Resources
since July, 1985.

Ullrich E. Porzig has served as Senior Vice President and Chief
Financial Officer since February, 1996. Between 1993 and 1996, Mr.
Porzig was Senior Vice President-Financial Officer and Treasurer of
Petro Stopping Centers L.P.  From 1982 to 1993 he was employed by
The May Department Stores Company in various capacities including
Senior Vice President-Chief Financial Officer of the Company from
1986 to 1988 and Senior Vice President-Finance of Foley's (1988-1993).

William J. Rainey has served as Senior Vice President, General
Counsel and Secretary since April, 1996.  Prior to joining the
Company, Mr. Rainey served as Executive Vice President, General
Counsel and Secretary of Fourth Financial Corporation (1994-1996)
and Vice President, General Counsel of Cabot Corporation (1991-1993).

Thomas L. Rinehart has served as Senior Vice President and General
Merchandise Manager-Men's since December, 1992.  Before joining the
Company, he was employed by the Custom Shop as President and Chief
Operating Officer (1992) and by Club International as President and
Chief Executive Officer (1991-1992).

Gary M. Stone has served as Senior Vice President-Store Development
since February, 1997.  Prior to joining the Company, Mr. Stone was
employed by Pepsico, Inc. as Senior Vice President and General
Manager (1995-1997) and Vice President, Asset Development (1991-1995).

Larry M. Strecker has served as Senior Vice President of the
Company and Managing Director of Payless ShoeSource International
since April, 1996. Prior to that, he was Vice President of
Worldwide Sourcing (1993-1996).  Before joining the Company, Mr.
Strecker was employed by Frito-Lay as Director of Service and
Distribution (1991-1993).


                                11
<PAGE>
Michael S. Wilkes has served as Senior Vice President and General
Merchandise Manager-Children's since January, 1994.  Prior to that
he was Senior Vice President-General Merchandise Manager-Women's
Dress/Casual (1990-1994).  Mr. Wilkes has been employed by the
Company since 1986.


Item 2.  Properties
-------------------

The Company leases substantially all of its stores.  The leases
typically have a primary term of 10 years, with one or two five-year
renewal options.  Leases usually require payment of base rent,
applicable real estate taxes, common area expenses and, in some
cases, percentage rent based on the store's sales volume.  Its
Payless stores average approximately 3,400 square feet.  The
Company owns and operates a 305,000 square foot central office
building and a 765,000 square foot distribution facility both of
which are located in Topeka, Kansas. 


Item 3.  Legal Proceedings
--------------------------

There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which
registrant or any of its subsidiaries is a party or of which any of
their property is the subject.                 


Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

There were no matters submitted to a vote of security holders
during the 13 weeks ended February 1, 1997.


                            
                             PART II

Item 5.  Market for Company's Common Equity and Related Shareowner
------------------------------------------------------------------
Matters
-------
There were approximately 70,000 shareowners of record of the
Company's common stock as of February 1, 1997.  The information set
forth under the headings "Common Stock and Market Prices" (page 15)
and "Shareowner Information - Common Stock" (page 28) in the
Company's 1996 Annual Report to Shareowners is incorporated herein
by reference.

Item 6.  Selected Financial Data
--------------------------------

The information set forth under the heading "Summary of Selected
Historical Financial Information" (page 25) of the Company's 1996
Annual Report to Shareowners is incorporated herein by reference.

                                12
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial
----------------------------------------------------------
Condition and Results of Operations
-----------------------------------

The information set forth under the heading "Management's
Discussion and Analysis" (pages 12-15) of the Company's 1996 Annual
Report to Shareowners is incorporated herein by reference.

<PAGE>

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

The Financial Statements (pages 16-18), "Notes to Consolidated
Financial Statements" (pages 19-23) and "Report of Independent
Public Accountants" (page 24) of the Company's 1996 Annual Report
to Shareowners are incorporated herein by reference.


Item 9.  Changes in and Disagreements with Accountants on
---------------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------

None.



                             PART III

Item 10.  Directors and Executive Officers of the Company
---------------------------------------------------------

a)  Directors - The information set forth under the heading "The
Election of Directors" on pages 1-3 of the Company's Proxy
Statement dated April 14, 1997 is incorporated herein by reference.

b)   Executive Officers - Information regarding the Executive
Officers of the Company as of April 14, 1997 is set forth in Item
1 of this report under the caption "Executive Officers of the
Company."

Item 11. Executive Compensation
-------------------------------

The information required by Item 402 of Regulation S-K is
incorporated herein by reference from the Company's Proxy Statement
dated April 14, 1997, as follows: page 3, "Compensation of
Directors;" page 4, "Compensation Committee Interlocks and Insider
Participation;" pages 5-6, the description of long term awards
under the captions "Bonus Opportunities," "Long-Term Stock
Incentives," "Spin-off Arrangements," and pages 21-23, under the
captions "Annual Awards" and "Long Term Awards;" and pages 9-15,
under the caption "Executive Compensation." 



                                13
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
------------------------------------------------------------
Management
----------

The information required by Item 403 of Regulation S-K is
incorporated herein by reference from the Company's Proxy Statement 
dated April 14, 1997, as follows: pages 25-26, "Beneficial Stock
Ownership of Directors, Nominees, Executive Officers and Persons
Owning More than Five Percent of Common Stock."

Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------

Not applicable.


                             PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on
----------------------------------------------------------------
Form 8-K
--------

(a)  Documents filed as part of this report:
     (1)   Financial Statements.  The following financial         
           statements are incorporated herein by reference to the 
           Company's 1996 Annual Report to Shareowners:
                                                                  
                                                      Page in
                                                   Annual Report
                                                   -------------
           Financial Statements-
            Consolidated Statements of Earnings for 
               the three fiscal years ended 
               February 1, 1997                           16
            Consolidated Statements of Shareowners'
                Equity for the three fiscal years 
                ended February 1, 1997                    16
            Consolidated Balance Sheets - 
                February 1, 1997, and February 3, 1996    17
            Consolidated Statements of Cash Flows 
                for the three fiscal years ended
                February 1, 1997                          18
           
            Notes to Consolidated Financial Statements   19-23
            Report of Independent Public Accountants      24











                                14
<PAGE>
     (3)   Exhibits:             
      
Number                             Description    
------                             -----------

2.1            Distribution Agreement, dated as of April 2, 1996,
               between The May Department Stores Company ("May")
               and the Registrant.1

3.1            Amended and Restated Articles of Incorporation of
               the Registrant.2

3.2            Amended and Restated Bylaws of the Registrant.*

4.1            Rights Agreement, dated as of April 2, 1996,
               between the Registrant and The Bank of New York, as
               Rights Agent.1

10.1           Tax Sharing Agreement, dated April 2, 1996, 
               between May and the Registrant.3

10.2           Sublease, dated as of April 2, 1996, between May
               and the Registrant.1

10.3           Multi-Currency Credit Agreement, dated as of April
               22, 1996, among the Registrant, several financial
               institution and Bank of America National Trust and
               Savings Association.4

10.4           Administrative Services Agreement, dated as of
               April 2, 1996, between May and the Registrant.1

10.5           Payless ShoeSource, Inc. 1996 Stock Incentive Plan,
               as amended.5

10.6           Payless ShoeSource, Inc. Spin-Off Stock Plan.1

10.7           Payless ShoeSource, Inc. Spin-Off Cash Plan.1

10.8           Payless ShoeSource, Inc. Restricted Stock Plan for
               Non-Management Directors.1

10.9           Form of Employment Agreement between the Registrant and
               certain executives of the Registrant. The Registrant has
               entered into Employment Agreements in the form contained
               in this exhibit with each of the named executive
               officers which expire at various dates on or before May
               31, 2001, and which provide for annual base salaries at
               rates not less than the amounts presently paid to them.1

10.10          Payless ShoeSource, Inc. Supplementary Retirement Plan.1

10.11          Payless ShoeSource, Inc. Profit Sharing Plan.1

10.12          Payless ShoeSource, Inc. Deferred Compensation Plan.

10.13          Payless ShoeSource, Inc. Executive Incentive
               Compensation Plan for Payless Executives.6
                                15
<PAGE>
10.14          Form of Management Severance Agreement.  The Registrant
               has entered into Severance Agreements with the named
               executive officers in the form contained in this
               exhibit.1  The agreement with Mr. Douglass also provides
               for a "tax gross-up" payment to ensure that the above-mentioned
               payments are not subject to net reduction due
               to imposition of excise taxes which are payable under
               Section 4999 of the Internal Revenue Code.  The
               agreement with Mr. Jolosky provides for 50% of such
               payment.

10.15          Form of Indemnification Agreement.1

11.1           Computation of Net Earnings Per Share.*           

12.1           Computation of Ratio of Earnings to Fixed Charges.*

13.1           Payless ShoeSource, Inc. 1996 Annual Report to 
               Shareowners (only those portions specifically
               incorporated by reference shall be deemed filed with the
               Commission).*                           

21.1           Subsidiaries of Registrant*

23.1           Consent of Independent Public Accountants.*

24.1           Power of Attorney

27.1           Financial Data Schedule*
                                                    
* Filed herewith
  1) Incorporated by reference from the correspondingly numbered Exhibit to
     Registrant's Registration Statement on Form 10 Dated February 23, 1996
     as amended through April 15, 1996.
  2) Incorporated by reference from Exhibit 3.1 of the Registrant's Form 
     10-Q (file Number 1-11633) for the quarter ended May 4, 1996.
  3) Incorporated by reference from Exhibit 10.1 of the Registrant's Form 
     10-Q (file Number 1-11633) for the quarter ended May 4, 1996.
  4) Incorporated by reference from Exhibit 10.2 of the Registrant's Form
     10-Q (file Number 1-11633) for the quarter ended May 4, 1996.
  5) Incorporated by reference from Appendix A(pages A-1 to A-13)
     Registrant's April 14, 1997, Proxy Statement relating to its May 23,
     1997 annual meeting of shareowners.
  6) Incorporated by reference from Exhibit 10.5 of the Registrant's Form
     10-Q (file Number 1-11633) for the quarter ended May 4, 1996.
  
     (3)   Reports on Form 8-K:  None

All other schedules and exhibits of the Company for which provision
is made in the applicable regulations of the Securities and Exchange
Commission have been omitted, as they are not required or are
inapplicable or the information required thereby has been given
otherwise.





                                16
<PAGE>
                            SIGNATURES
                            ----------

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                               PAYLESS SHOESOURCE, INC.

Date:  April 24, 1997          By: /s/ Ullrich E. Porzig          
                               ----------------------------------
                                        Ullrich E. Porzig
                                        Senior Vice President and
                                        Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of registrant and in the capacities and on the dates
indicated.

                    Principal Executive Officer:


Date:  April 24, 1997          By: /s/ Steven J. Douglass         
                               ----------------------------------
                                        Steven J. Douglass
                                        Chairman and
                                        Chief Executive Officer



                    Principal Financial and
                      Accounting Officer:


Date:  April 24, 1997          By: /s/ Ullrich E. Porzig          
                               ----------------------------------
                                        Ullrich E. Porzig
                                        Senior Vice President and
                                        Chief Financial Officer
















                                17
<PAGE>
                            Directors:


Date:  April 24, 1997          By: /s/ Steven J. Douglass*
                               ----------------------------------
                                        Steven J. Douglass
                                        Chairman and
                                        Chief Executive Officer


Date:  April 24, 1997          By: /s/ Richard A. Jolosky*
                               ----------------------------------
                                        Richard A. Jolosky
                                        President and Director    
           

Date:  April 24, 1997          By: /s/ Howard R. Fricke*
                               ----------------------------------
                                        Howard R. Fricke
                                        Director


Date:  April 24, 1997          By: /s/ Thomas A. Hays*
                               ----------------------------------
                                        Thomas A. Hays            
                                        Director


Date:  April 24, 1997          By: /s/ Michael E. Murphy*
                               ----------------------------------
                                        Michael E. Murphy
                                        Director


Date:  April 24, 1997          By: /s/ Robert L. Stark*
                               ----------------------------------
                                        Robert L. Stark
                                        Director


*Executed by William J. Rainey, attorney-in-fact, on behalf of the
indicated Director pursuant to Power of Attorney dated April 17,
1997.















                                18
<PAGE>