At a time when the cost of milk and gas are both approaching $4.99 a gallon, there's a place where 99 cents amounts to more than just change.
The 99 Cents Only Stores is still selling every item for less than a dollar, despite sharply rising energy and food costs.
The price guarantee has driven more and more shoppers into the company's 265 outlets, which this month reported same-store sales growth of 1.5 percent in the fiscal fourth quarter.
But it's also a guarantee that's getting harder, though not impossible, for the company to keep as the return of inflation eats into its bottom line.
Despite rising sales, the City of Commerce company reported a quarterly loss of $4.4 million as its gross margins slid two points to 37.3 percent.
In response to the inflation, the company has made subtle changes, including pricing items for other than 99 cents though never more. For example, two gallons of water used to cost 99 cents. Now each sells for 59 cents. Jumbo gift bags are no longer two for 99 cents. They're also 59 cents.
"This is how we recoup extra gas costs," said 99 Cents Only Chief Executive Eric Schiffer. "We've never done this before. But no one's going to complain that a gift bag costs 59 cents. Wal-Mart sells the same one for $2.97."
The company is also working with manufacturers to repackage items to sell less for more. A half-gallon jug of milk used to sell for 99 cents. Now it's down to a quart.
And some items, which have been particularly hit hard by inflation, are sometimes not on the shelf. Eggs, which once sold 99 cents for a dozen, are now going 99 cents for a half dozen. But they're not available in some stores.
However, the return of inflation has also been accompanied by a recessionary economy, which presents opportunities to companies like 99 Cents Only because it buys closeout merchandise.
"Every time the economy shifts, you're going to have excess merchandise," said analyst Ron Bookbinder of Global Hunter Securities. "Some businesses just don't make it and there's going to be more close-out inventory. For others, keeping surplus merchandise is getting expensive and they're looking for ways to unload them."
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