Texas Wallops 99 Cents

"One of our highest 2005 priorities is improving the performance of our Texas stores," 99 Cents Only CEO Eric Schiffer said during the company's quarterly conference call. The company blamed its falling profits on factors including a $10.1 million addition to its California workers' compensation reserve and the continued lower than expected sales volume in its Texas stores. Schiffer said the company in the second quarter of this year took "what we believe are significant steps intended to help control our California workers' compensation costs." The company reported that, in 2004, all stores open for a full year other than those in Texas averaged sales of $4.8 million per store, while Texas stores averaged $2.2 million. Average sales per sellable sf for all stores, excluding Texas, averaged $293 while Texas averaged $101.

In view of the poor results in Texas, "For the remainder of 2005, we do not currently plan to open additional stores in Texas as we analyze further our Texas store operations," Schiffer said. The company believes that there is potential for its continued growth in Texas, he said, and it is determining the best strategy in that market.

In the rest of the country, 99 Cents Only plans to continue to open new stores. "We anticipate growth to come primarily from opening new stores in existing markets this year and in 2006, and thereafter by expanding into new states," Schiffer said. He outlined a strategy in which the company plans to increase its store opening growth rate to approximately 10% of the existing store base in 2006. "It is anticipated that almost all 2006 openings will be in our existing core markets of California and Arizona," Schiffer said. In 2007, the company plans to accelerate the store opening growth rate to 15% to 20%. After 2007, the company plans to open at 15% to 20% as it expands into new markets as part of its strategy "to become one of the nation's premier deep discount retailers" Schiffer said. The 99 Cents Only CEO also listed other top priorities, among them internal changes like building and strengthening the management team, which Schiffer called "my biggest priority as the CEO of this company." Other objectives that Schiffer listed for the company include strengthening its financial and management controls, increasing store shelf in-stock positions, completing implementation of its HighJump warehouse management system in California and implementation of a company-wide merchandising system.

The 99 Cents chain's income results came on fourth quarter sales of $265.9 million, an increase of $18.4 million from the fourth quarter of 2003, which it attributed primarily to the larger number of stores. Sales for the year totaled $972.2 million, up $109.7 million. The company operates 224 retail stores in California, Texas, Arizona and Nevada, and a wholesale division called Bargain Wholesale.