Discount chain City of Commerce announced Thursday that 99 Cents Only Stores will close all 371 stores and scale back operations after more than 40 years.
“This was a very difficult decision and not the outcome we expected or hoped to achieve,” Interim CEO Mike Simoncic said in a statement. “Unfortunately, recent years have presented significant and persistent challenges to the retail environment.”
He cited multiple factors, including the “unprecedented impact” of the coronavirus pandemic, changes in consumer demand, continued inflationary pressures and rising shrinkage levels. Shrink is an industry term that refers to the loss of inventory due to reasons such as shoplifting, employee theft, and employee theft. Administrative error.
Together, these issues have “significantly disrupted the company's ability to operate,” Simoncic said.
99 Cents Only has locations in California, Arizona, Nevada and Texas and employs approximately 14,000 people. The privately held company announced it has reached an agreement with Hilco Global to liquidate all merchandise and dispose of store fixtures, furniture and equipment. Sales are scheduled to begin Friday.
Hilco Real Estate manages the sale of the company's owned and leased real estate assets.
Brad Thomas, equity research analyst at KeyBanc Capital Markets, said the 99 Cents Only announcement reflects a significant downturn in the dollar store sector.
He noted that Chesapeake, Virginia-based retailer Dollar Tree announced earlier this month that it would close 600 Family Dollar stores this year and 370 more over the next few years.
“These are trying times for so many retailers,” he said. “What's interesting is that what started as a boon for retailers during the pandemic, the stimulus package quickly turned into a very troubling time.”
Rising wages, inflation and mounting losses from retrenchment are hurting profits for retailers in the discount sector, which already has razor-thin profit margins.
He said 99 Cents Only, which has a large store base in California, is especially under wage pressure. And it's at a disadvantage compared to major chains like market leader Dollar General, which has nearly 20,000 stores — “with a sales base and store base many times larger than 99 Cents,” Thomas said. said.
Last week, Bloomberg reported that 99 Cents Only was facing a liquidity crunch and considering filing for bankruptcy.
Founded in Los Angeles in 1982 by David Gold, 99 Cents Only pioneered the single-price retail concept. At the time, 100-yen stores were seen as dumping grounds for undesirable goods, but the Gold family kept the store bright and organized, stocking high-quality items such as groceries and household goods.
For many years, the store was one of the few true “dollar” stores, with items priced at 99 cents or less, or grouped together to sell for a total of 99 cents.
That all changed in 2008, when 99 Cents Only announced it was departing from its long-standing pricing strategy in the face of rapid inflation, rising food and fuel prices, and an increase in the minimum wage.
Three years later, as investors focused on dollar stores that gained popularity during the Great Recession, the company announced it had agreed to sell in a deal worth about $1.6 billion.
Currently, there are stores scattered throughout Los Angeles County, including Hollywood, Silver Lake, Mid-Wilshire, Thai Town, North Hollywood, Glendale, and near downtown, but with the closure of 99 Cents Only, a large number of stores in prime locations will be located. This will leave a large number of vacant properties. .
Other major retailers have recently announced store closures in the area, including REI in Santa Monica, Macy's in Simi Valley, and several Rite Aid locations.
99 Cents Only did not immediately respond to a request for comment Thursday afternoon.
