With its famous bargain-basement prices on plastic trash bags, milk, bleach, mugs, headphones and all other manner of odds and ends, 99 Cents Only Stores has experienced stellar sales in this tough retail environment.

When just about every retailer reported dismal numbers for the end of 2008, 99 Cents Only posted a 4.2 percent increase in same-store sales for the fourth quarter. The City of Commerce-based chain outpaced Wal-Mart Stores Inc.'s 1.7 percent spike, which fell below analysts' expectations.

The increase in gasoline prices forced the chain to raise its namesake "nothing over" price in September from 99 cents to 99.99 cents but new customers have crowded the aisles as the economy has worsened.

Excluding the Texas market, which the company plans to exit, the number of same-store sales transactions were up 1.8 percent, and the average transaction rose 2.5 percent.

Joan Storms, an analyst with Wedbush Morgan Securities in Los Angeles, said the recession brought customers looking for deals into the stores. And they found them, so they've been going back for more.

"They typically buy some kind of hard good but don't buy food right away," Storms said. "Now they're buying the perishable food as well."

The company's grocery aisles carry fresh fruits and vegetables, dairy products and frozen foods, among others. Well-known name brands are represented, including Lean Cuisine, Gatorade and Dole.

"Over 50 percent of our stores' products are foods," said Eric Schiffer, chief executive of 99 Cents Only, "and I think people are realizing that they can do the household marketing at our store."

The difference between buying a name-brand product at a 99 Cents Only store and at a regular-priced retailer could be an old label, irregular size or discontinued product. The 99 Cents Only store near Wilshire Boulevard and Fairfax Avenue close to the Miracle Mile area recently offered 99-cent deals on a package of six pills of pain reliever Aleve, three minibottles of Gatorade and a Hannah Montana pen.

Low profit

Commodity prices have fallen recently, but for a while it was difficult for the stores to consistently stock eggs and bananas. But when they're on the shelves, they sell fast. The company doesn't make much of a profit on them, though, Storms said.

Total sales were $351 million for the quarter ended Dec. 27, an increase of 8 percent over the year before.

From April 1, the beginning of the company's 2009 fiscal year, total sales were nearly $974 million, up 7.1 percent compared with the same span in calendar year 2007. Same-store sales for these nine months increased 2.9 percent.

The company's stock has also risen 36 percent from a year ago to about $9, which Storms said was the result of better internal operations.

"Trucks are arriving on time, they have better in-stock on core items, and employees are getting products on shelves faster," she said. "They've had problems with this in the past."

Another factor in the stock's rise: The company is leaving Texas to focus on its 234 stores in California, Arizona and Nevada, which are the source of about 90 percent of revenue.

When the decision to leave the Lone Star State was announced, the company had a combined operating loss of about $15 million there for the four quarters ended June 28.

David Gold, 99 Cents Only's chairman, said he wants to buy the Texas stores. The company formed a special committee to consider the proposal, but hasn't announced a decision.

There had been speculation that the chain would raise its top price to $1.99. Schiffer said going up a penny rather than a buck looks like it was the right call.

"I don't know if we lucked out or not," he said. "But our customers responded well to it."

For reprint and licensing requests for this article, CLICK HERE.