99 Cents Only Stores will close all 371 stores and end its business operations after more than four decades, the Commerce City discount chain announced Thursday.
“This was an extremely difficult decision and was not the outcome we expected or hoped to achieve,” interim CEO Mike Simoncic said in a statement. “Unfortunately, the past few years have presented significant and lasting challenges in the retail environment.”
He cited multiple factors, including the “unprecedented impact” of the COVID-19 pandemic, shifting consumer demand, persistent inflationary pressures and rising levels of deflation — an industry term for inventory loss attributed to causes such as shoplifting, employee theft, and administrative errors.
Together, these issues “significantly hampered 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 has reached an agreement with Hilco Global to divest all of its merchandise and dispose of fixtures, furnishings and equipment in its stores. Sales are expected to begin on Friday.
Hilco Real Estate manages the sale of company-owned or leased real estate assets.
The 99-cent-only announcement reflects greater weakness in the dollar store category, said Brad Thomas, an equity research analyst at KeyBanc Capital Markets.
He noted that Dollar Tree, a retailer based in Chesapeake, Va., announced last month that it would close 600 of its Family Dollar stores this year and an additional 370 in the next few years.
“It's been difficult times for many, many retailers,” he said. “What’s interesting is that what started out as a blessing for retailers in the pandemic, with all these stimulus checks, quickly turned into a very disturbing time.”
Rising wages, inflation and rising losses due to deflation have reduced profits for retailers in the deep discount sector where margins are already very low.
99 Cents Only, with its large base of California stores, has come under particular wage pressure, he said. It is at a disadvantage compared to larger chains like market leader Dollar General, which has a store count approaching 20,000 — “a sales base and store base many times larger than 99 Cent,” Thomas said.
Last week, Bloomberg reported that 99 Cent Only was considering filing for bankruptcy because it is short on cash.
Founded in Los Angeles in 1982 by David Gould, 99 Cents Only pioneered the concept of one-price retailing. At the time, dollar stores were viewed as places to dispose of unwanted products, but the Gould family made the stores bright and well-organized, with quality merchandise including groceries and household supplies.
For years, it has remained one of the few true “dollar” stores, where items are priced at 99 cents or less or bundled for sale for a total of 99 cents.
That changed in 2008, when 99 Cent Only, facing rapidly rising inflation, rising food and fuel prices, and a rising minimum wage, announced it was moving away from its long-term pricing strategy.
Three years later, the company announced it had agreed to sell it in a deal worth about $1.6 billion, as investors eyed dollar stores that had grown in popularity during the Great Recession.
Today, with stores spread throughout Los Angeles County — among them in Hollywood, Silver Lake, Mid-Wilshire, Santa Monica, Thi-Town, North Hollywood, and Glendale — closing 99 Cent Only will leave a number of large vacant properties in prime locations.
Other major retailers also announced the closure of their stores in the area recently, 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.
