99 Cents Only Stores will close all 371 of its stores and wind down its business operations after more than four decades, the City of Commerce discount chain announced Thursday.
“This was an extremely difficult decision and is not the outcome we expected or hoped to achieve,” interim Chief Executive Mike Simoncic said in a statement. “Unfortunately, the last several years have presented significant and lasting challenges in the retail environment.”
He called out several factors, including the “unprecedented impact” of the COVID-19 pandemic, shifting consumer demand, persistent inflationary pressures and rising levels of shrink — an industry term that refers to loss of inventory attributed to reasons such as shoplifting, employee theft and administrative errors.
Combined, those issues “have greatly hindered the company’s ability to operate,” Simoncic said.
99 Cents Only has stores in California, Arizona, Nevada and Texas and has about 14,000 employees. The privately held company said it had reached an agreement with Hilco Global to liquidate all of its merchandise and dispose of fixtures, furnishings and equipment at its stores. Sales are expected to begin Friday.
Hilco Real Estate is managing the sale of the company’s real estate assets, which are owned or leased.
The announcement by 99 Cents Only reflects a larger weakness in the dollar-store category, said Brad Thomas, equity research analyst at KeyBanc Capital Markets.
Dollar Tree, a Chesapeake, Va.-based retailer, announced this month it was closing 600 of its Family Dollar stores this year and another 370 in the next few years, he noted.
“It’s been trying times for many, many retailers,” he said. “What’s interesting is that what started out as a boon to retailers in the pandemic, with all those stimulus checks, quickly turned into a very troublesome time.”
Rising wages, inflation and higher losses due to shrinkage have reduced profits for retailers in a deep-discount sector where margins are already extremely low.
99 Cents Only, with its large base of California stores, has been under particular wage pressure, he said. And it’s at a disadvantage compared with larger chains such as market leader Dollar General, which has a store count close to 20,000 — “a sales base and a store base that is multiple times larger than 99 Cents,” Thomas said.
Last week, Bloomberg reported that 99 Cents Only was considering a bankruptcy filing as it contended with a liquidity shortfall.
Founded in Los Angeles in 1982 by David Gold, 99 Cents Only pioneered the single-price retail concept. At the time, dollar stores were seen as dumping grounds for undesirable products, but the Gold family made the stores bright and well-organized, with good-quality merchandise including groceries and household supplies.
For years, it remained one of the few true “dollar” stores, with items priced at 99 cents or less or grouped to sell for a total of 99 cents.
That changed in 2008 when, faced with fast-rising inflation, soaring food and fuel prices, and a higher minimum wage, 99 Cents Only announced that it was straying from its long-standing price strategy.
Three years later, the company announced that it had agreed to be sold in a deal valued at about $1.6 billion, as investors eyed dollar stores that had grown in popularity during the Great Recession.
Today, with stores scattered around Los Angeles County — among them in Hollywood, Silver Lake, Mid-Wilshire, Thai Town, North Hollywood, Glendale and downtown — the closure of 99 Cents Only will leave a rash of large vacant properties in prime locations.
Other large retailers have also announced store closures in the region lately, including REI in Santa Monica, Macy’s in Simi Valley and several Rite Aid locations.
99 Cents Only did not immediately return a request for comment Thursday afternoon.
