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Bargain Stores Find Good Deal to Cheer in Slow Economy

Retail: Stock prices and earnings are up at discount chains as shoppers seek to stretch their dollars.


Dave Gold, the company's 68-year-old chairman, developed the concept when he owned a liquor store at the Grand Central Market in downtown Los Angeles. Gold found that he could move slow-selling foreign wines by displaying them under international flags as "wines of the world." Any bottle in that section sold for 99 cents.

Gold opened his first 99 Cents Only store on La Tijera Boulevard near Los Angeles International Airport in 1982. The chain grew slowly until its public offering on the New York Stock Exchange in 1996, when it started to increase the number of outlets by 25% annually.

Bogucki-Storms, the Wedbush analyst, believes that the chain could grow to 2,000 outlets, including 200 in Southern California. It is now expanding into the Phoenix and Las Vegas markets.

Four of the company's top five officers--including son-in-law Schiffer--are members of the Gold family. They control about 40% of 99 Cents Only Stores' stock. Andrew Farina, the chain's chief financial officer, is the only outsider. The company has no debt and $118 million in cash. The average transaction is $8.50.

What differentiates the 99 Cents Only chain from the other bargain retailers is its emphasis on grocery items and household products.

"We get soups, cookies, snacks, even toothpaste," said Jennifer Martin of Long Beach, piling cans of Heinz macaroni and beef--two for 99 cents--into her cart. Martin, who has shopped at 99 Cents Only for several years, said she was glad when the Hawaiian Gardens store opened because it was only one bus trip from her home. Previously, Martin rode two buses to reach the Lakewood store.

About 80% of the company's offerings are everyday consumables, which makes the chain more appealing to customers often better heeled than typical bargain retail shoppers.

Its best-performing store is not far from Beverly Hills in the Museum Row section of Wilshire Boulevard. Annual sales there top $9 million, about double the chain's average, Schiffer said.

This has prompted the chain to locate many of its new stores in middle-class neighborhoods.

The problem, according to Schiffer, is getting people into stores for the first time. That's why the company has developed a quirky marketing campaign that plays off the 99-cents theme.

When Schiffer opened the Montebello store in January, he invited Barbara Feldon, Agent 99 of the old "Get Smart" television series. She didn't show. But the company did have a line for its promotion of 19-inch color televisions for 99 cents to the first nine customers and 99-cent scooters for the next 99.

"You have to overcome the skepticism that there are really bargains," Schiffer said. "Once they come in, we got them."


Bucking the Economy

After missing Wall Street's expectations for its earnings in the third quarter because of problems at a division that has since been divested, the outlook and stock price for 99 Cents Only Stores Inc. improved as the economy weakened.


Monthly closes and latest on NYSE

Friday: $37.00, down 20 cents

Source: Bloomberg News

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