'Mostly 99 Cents Only'? Chain rethinks its pricing scheme

Would shoppers be willing to pay more than 99 cents for something at the 99 Cents Only Stores chain? Or would breaking a buck induce customer mutiny -- or maybe even cause the Earth to spin off its axis?

Squeezed by a higher minimum wage and soaring commodity prices, the City of Commerce-based retailer on Thursday reported its second consecutive quarter of red ink -- a loss of $1.5 million, or 2 cents a share, for the three months ended June 28.

Given the hard times many American consumers are facing, you’d think 99 Cents Only would be packing them in. The company told analysts on a conference call Thursday afternoon that although last quarter’s sales ($305 million) "grew slightly more slowly than anticipated," same-store sales were strengthening toward the end of last quarter and "have continued strengthening" in the current quarter.

Still, one analyst on the call wanted to know whether the company would consider giving itself more pricing flexibility, presumably to improve the bottom line.

The retailer already charges less than 99 cents for some stuff. But what about charging, say, $1.09 or $1.29 for certain items? the analyst asked.

If you know the chain, you know that sounds like heresy. As its website proudly proclaims: "STILL nothing over 99 cents, ever!"

Yet CEO Eric Schiffer said the idea was "definitely on the table. That is something we’re looking at . . . in the future for us. We’re looking at doing some experiments. Obviously one way [is that] you can start selling things for $1.05, $1.09, $1.15 and other ways. You could have more of a break between your 99 cents price point and the next price point."

Schiffer also addressed the question of whether prices above 99 cents for some goods would alienate the 26-year-old chain’s loyal customers. Not surprisingly, he said the issue should be whether a price provides "great value," not whether it was 99 cents.

Maybe the chain’s shoppers should begin to mentally prepare themselves: Schiffer finished up sounding  as if a new pricing scheme was inevitable. "With the way that the cost structures are for our company and for just the economy and the environment, there’s no question we’re going to need to do something," he said.

The earnings were announced after the market closed. The company's shares slipped 9 cents to $7.06 before the report. They hit an 11-year low of $5.85 on July 15. No doubt many weary shareholders would concur with Schiffer: "Yes, do something."

Photo: Inside a 99 Cents Only store in L.A.  Jamie Rector / Los Angeles Times

Comments

[MSchafer]

Even McDonalds is revising the Dollar Menu. There isn't much value in a dollar anymore.

Remember the children's song, "A penny, a penny, a bright and shiny penny, it can't buy anything, but if you save ..."

[Diaz]

Blasphemy!!!!

[Bonnie%20Lee]

That would be terrible if a 99-cent store offered items for $1.15. They'd have to change their name to "99 cents only and some items you can buy for $1.15 (R)"

[John]

I guess they're going to have to change their name. No big deal. I went to Lucky the other day and they've changed their name to "Even Odds." (rimshot)

[Oscar]

yeah it all sounds like a load of bull to me...there's already a bunch of independent small businesses that rip off the 99 cents only brand and charge for things more than 99cents.

I would think a better scheme would be to have items that are 1.99, 2.99 and so on, but offer those prices on items that are higher quality, I think the chain would get a good response to that.

[Becky Encinias]

The reason the store is losing money is because they don't have the same bargains as before since they have raised their prices from let's say 2 for 99 to 59 each. The reason everyone went to the 99 cent store was for the 2 or 3 for 99 cents vs 59 cents, 69 cents for one. If we don't get the bargain from the 99 cents store, why go there instead of to the regular store where you can get the same thing for 59, 69, or 79 cents. With gas prices the way they are why would you make a special trip to the 99 cents store to only save 10 to 20 cents on certain items vs. making one trip to the regular store.

[brady%20westwater]

They have no choice but to change. I don't go as often as I used to partly because many of the items I used to buy, they no longer stock since they can no longer sell for them 99 cents. But the main reason I rarely go to the store at Wilshire and Westlake is that the lines are so long; sometimes more people are standing line than are shopping in the rest of the store at times. They have the world's slowest cashiers, no one doing any bagging for them and they will never open a new cash register until the lines are so long, many people walk into the store - see the lines - and walk right out.

Now this may be the only store that is being badly managed (no other ones I have visited have had this problem), but everyone Downtown I know who used to go there, has stopped going because it takes too long to pay for anything.

[E. wiggins]

don't change horses in the middle of the stream! 99 cents should always be 99 cents!

[Sally Gee]

I went to a 99 store for the first time in about 5 or so years and was surprized at how much refrigerated food they now carry. Even breaded crab claws! The last time I was there, they seemed to have more name brand juices as opposed to what they now carry. Also, Shasta is in a 4 pack; not a 6 pack.

If they don't increase prices, the size will get smaller. Like the Ice Cream at the supermarkets that seem to be shrinking in size--But the price stays the same. What a rip.

[Mark]

This just illustrates what i have always known and lived by....a businessman is interested in only 3 things...first, himself, next, the profit, thirdly, the shareholder.
What's missing here?..the consumer or the one that the business serves.
Same old, same old.....the more money that a company makes....the greedier they get...I mean, after all, they only made over 300 million last year. How's a body supposed to survive on that?

[Maria]

It started with the eggs selling at .99cent for a half dozen. But, thankfully, I saw them back at 99cent a dozen. It would be great to see a company stay the line in the face of this current economy, but it's inevitable that even the .99cent only store has to keep up the the times. After all, a $1 is not worth what it was 26 years ago.

[Mickey malone]

You made the milk container smaller, you cut the eggs to 99C for a half dozen; the vegetables have been trimmed so that they cost the same as Vons, and sometimes Vons is cheaper. Yes, its still my most inexpensive to shop, but your getting close to pricing me out too.

[Radical Raul]

I shopped there a lot until I had a heart attack and needed to change my diet, then they stopped carrying a lot of my favorite items.

Still went there for my necessities, until I moved to Colorado Springs.

I do miss the 99 cent store and now it's Big Lot's for me, the Family Dollar Stores here having literally nothing for a dollar and carry the same basic things as Big Lots.

[mari]

Im a mom and not even my kids want things from the 99 cent store. I think people have goten tired of the cheap products. The Toys dont usually work

[Bill]

Running one of these store is not easy task. However, must of the problems that the 99 Cents Only Stores have is the blind trust the Gold family put on his son-in-law Eric Schiffer and the ill advise expansion into Texas.

If Eric is suggesting to change the pricing scheme at these store I will be concerned. This guy is clueless and obviously not qualified to run this company. His only qualification is being the son-in-law of the founder, David Gold.

What the Board at this company should do is oust Mr. Schiffer before moving forward with another of his ill conceived ideas.

[Evert]

I agree with the Bill. The company lacks vision. Eric Schiffer is clueless. Most of the management has moved up from within the ranks of are family members. The lack the training, education or experience to lead. One of the Gold's sons lead the distribution for the 99C only company, but he has no experience othen than working for dad. They need new blood with the knowledge and knowhow to lead and take this company back to the glory days. Their stock is a joke at $5, which once traded in the mid to high $20s.

[dick bohanon]

noticed on last trip(2 days ago) selection was limited
i guess shipping from china makes a lot of products
too costly to sell.
they probably will have to go back to
selling more distressed and overstocks
and less 99er specific products.
spending less every time i shop there

[Jason K]

One of the reasons that the excellent trolley car service LA used to have is no longer in existence is that the public demanded that the operators maintain their fares at 5 cents always.

With inflation, you simply cannot charge the same price for something in perpetuity. So long as they continue to have excellent bargains that you can’t find elsewhere, the chain can charge more than 99 cents and still stay viable.

[stan derrin]

I dont shop there anymore because its mostly made in china junk and everything there made of plastic, smells of nasty chemicals-off gassing.As for buying eggs,fruits and veggies there i wouldnt want to know what that food has been exposed to.You get what you pay for.

[Mike]

They need to raise the prices. Nothing good at .99. Last time I was there I didn't buy anything.

[A Rothman, Los Angeles, CA]

Evert needs to wake up. The stock closed today at $7.57. The stock has never hit $5 in the last 5 years. Besides, all stocks are down. Even steady profitable ones.

[sir jorge]

I used to live next to one, and it saved me many times when times were tough in college.

[george]

hey, motel 6 dun it, why not 99 only? it didnt hurt motel 6 nun.

[Evert]

Rothman, my apologies for not being accurate, but the stock closed at 5.85 on 7/15. The point is the company has floundered for the last 5 years. They have not addressed the concerns of the stock holder because of the loyalty to their son-in-law. In 2003 the stock it a high of $35 and 5 years later it is trading at junk levels. Their expansion to TX was ill; advised and doomed as they tried the same recipe there that worked here. They have stuck to the same merchandise stragedy and it is not paying off. Rothman, you must work or have ties to the 99c only stores to think that a $7.57 price for your stock is good for the investor.

[Cristina]

I found out at Ralphs 10 items for $10. Most items you usually get at 99c, trash bags, napkins, paper items, etc. so they better keep the prices or we shall have to go elsewhere.

[GEAH]

Maybe they can sell shares of their stock for 99 Cents Only!

[Krazd]

This was inevitable with the way things are going nowadays

[William]

Agreed, with inflation caused by the Fed bailing out the greedy jerks on Wall Street, there is hardly anything good at 99 cents. Why not change the name to 99 cents mostly? I still go there first, if whats in stock will not do, then stop at Albertsons on the way home. The best deal at 99 is the internet phone cards, sometimes you get cut off, but calls in the continental US are only a penny a minute. I doubt Verizon will ever match that.

[Narda]

Even Motel 6 isn't Motel 6 - charging 6 dollars for a room. Maybe they have to market to a new generation that 99cents is just the name, not the price of the items, just like motel 6 does. It is over $54.00 a room at a Motel6.

[Narda]

Maybe they could rebrand themselves like Motel6 did. Motel6 charges over $54.00 for a room, but new people don't even question where the Motel 6 came from - it was the charge for a room way back when. But, 99cents is hard to change - but maybe it will become the name and marketing just the name, maybe the new generation wouldn't think anything of it.

[SO_CAL_RETAIL_SLUT]

Like any business, we have seen the dramatic changes by 99c Only Stores.

Remember when:

1) 99c Only Stores only had stores in southern California?

2) 99c Only Stores did not carry perishible products (produce, refrigerated foods and frozen foods and bakery items)?

3) 99c Only Stores did not have gift cards, 99c Only Stores beach balls and telephone calling cards?

4) 99c Only Stores check-out process was simple, no fancy-pants electronic scanning systems and debit or credit...cash only?

99c Only Stores is a victim of it's own success. Whther it's other big name retailers such as Target, the grocery store chains and other independent dollar stores that have caught on to 99c Only Stores business plan, you these competitors vying for many of the same goods and products who also demand the best pricing and terms to offer products to compete with 99c Only Stores.

What 99c Only Stores financial picture does not tell are the pressures by the competition of other retailers who are competing for the same distressed goods, or more favorable pricing on lower end products that often 99c Only Stores may be outbid on a lot or large quantity of an item(s).

As others have posted, we have seen recent changes by the chain this year:

1) Introduction of the .59c price point on several products that were originally had at the old .50c or even .33c price point.

2) The loss and removal of many long-time items in 99c Only Stores offering, simply because of the run-up of the pricing of that individual product and the inability to offer the product in smaller size packaging, also known as "shrink-ray".

3) in 2007, 99c Only Stores worked with it's dairy vendor of Yuma, AZ to reduce it's unique 40 oz. container of fluid milk to 32 oz, but they continue to offer a quart for .99c, whic times four is often times less expensive than other stores than purchasing a half-gallon, or gallon. (Of course, the markets are still cheaper if you purchase two gallons at the same time).

I would ask the board to begin a cost containment plan. 99c Only Stores has been very good to it's hourly employees in offering health benefits. Should that be eliminated based on the margin returned to shareholders?

Also, the board should direct management to begin an orderly market withdrawal and store/warehouse closure of the Texas operations. Furthermore, if distribution costs continue to increase, the board should consider market withdrawals from northern California (north of Fresno) and Arizona.

The board should review the remainign store base and review those highr cost leases for termination and review areas with stores that are near one another that are cannobolizing sales from each other (two stores near each other in higher income Brea?).

Add stores in areas that have unique opportunities to continue growth by taking advantage of more favorable lease terms as other retailers may have shuttered and will sub-lease at below market rates, but only where the company does not cannabolize sales from other locations.

Remove any family members from supervisory roles (director and above) and cancel any lease deals with members of the Gold family.

These few steps along with other sound management practices will not only help 99c Only Stores survive, but thrive once the economy turns around!

[greg mitchell]

Wait until real inflation starts and a buck buys you EVEN less at 99Cent store. They should not even call themselves 99Cent only store because when you buy something for 99 cents, it's actually 99.9999 cents. It's only a penny but still a rip off and false advertising.

There used to be some real finds at 99 Cents only stores. Now, nothing impresses me there...smaller & smaller packages. The store is a rip-off. A bunch of low quality leftovers.