Payless ShoeSource Inc. announced Friday that it would close its massive distribution center in western Topeka in the summer of 2008, a move expected to cost up to 550 jobs.

But the Topeka-based company’s corporate headquarters – where 1,100 people work, including dozens of Lawrence residents – is poised to remain in eastern Topeka, as contractors expand operations on its third floor and make other upgrades, a spokesman said.

“We have no plans to go anywhere,” said James Grant, a Payless spokesman. “We’re throwing money into this building.”

The company’s lone distribution center, which covers 850,000 square feet, is being closed as Payless opts to operate two separate centers:

¢ A 400,000-square-foot center, set to open this summer in Redlands, Calif.

¢ A 600,000-square-foot center, expected to open in the summer of 2008, in a yet-to-be-determined location east of the Mississippi River.

The two centers – with a total investment of $77 million – will establish a “supply chain model” that is better aligned with the company’s “store geography,” Payless said, given that company stores are heavily clustered along the coasts and U.S. borders.

“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,” said Matt Rubel, president and chief executive officer of Payless, in a statement.

After accounting for severance packages and other costs related to the closure of the Topeka center, Payless anticipates the new distribution model to start contributing to earnings – through improved efficiencies and technologies – in 2009.

The Topeka distribution center currently has 600 employees. The work force will be expected to be about 450 to 550 by the time the center closes.

Affected employees will have the opportunity to apply for jobs at the new centers, Grant said, but Payless will not offer relocation assistance.

Payless, a company founded in Topeka by cousins Louis Pozez and Shaol Pozez in 1956, now has more than 4,500 stores in the United States, Canada, Puerto Rico and Central and South America. Payless has a contract arrangement for using a distribution center in Panama to serve stores in Central and South America.

Payless has a store in Lawrence at 3231 Iowa.