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Goldman Steps Into Payless

It has a 10% stake in the struggling shoe store chain.

Goldman Sachs'

(GS) - Get Goldman Sachs Group, Inc. (GS) Report

asset management unit has piled into

Payless Shoe Source

(PSS)

.

The investment bank has amassed a roughly 10% stake in the Topeka, Kan.-based footwear retailer, according to a filing submitted with the

Securities and Exchange Commission

. Goldman's position represents a more than $200 million investment in the shoe company, which has a $2 billion market capitalization.

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Payless CEO Matthew Rubel declined to comment and directed calls to spokesman James Grant, who said Goldman has been a big investor over the past few years but had been paring back a bit.

At the end of 2005, Goldman had accumulated 4.7 million shares in Payless. It then built that stake up to as much as 6.7 million shares by the end of 2006. Goldman now owns 5.9 million shares.

A call requesting comment from Goldman was not immediately returned.

Payless recently has been hit with bad news. Last week it recalled 690,000 pairs of clogs after a choking incident with a small child. Late last month, clothing retailer

American Eagle Outfitters

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sued the company, alleging it misled consumers to believe it has a contract with American Eagle to sell the clothier's merchandise.

Rubel, hired two years ago, has been trying to transform the retailer from a strictly discount-oriented shoe shop to one with a wider array of brands at midtier and higher prices.

According to reports, Payless also acquired brand developing licensing company Collective International, which could allow Payless to step up its revenues.

Payless fell 29 cents Thursday to $32.11.