Major footwear chain Payless ShoeSource Inc on Wednesday reported a 4.1 per cent slide in August same-store sales and warned of challenging second half.

The Kansas-based operator of more than 5,000 stores said total sales for the four weeks ended Saturday slipped 3.1 per cent to $232.7 million from $240.1m last year.

It added total sales for the first seven months of fiscal 2003 fell 5.3 per cent to $1.66 billion from $1.75bn in the year-ago period with same-store sales down six per cent.

"The retail environment remained promotional in August, and the company expects this aggressive promotional environment to continue,” Payless said in a news release.

"Pressure on sales, margins and earnings is likely to persist in the second half of the year. This is consistent with the company's previously announced expectations."