99 Cents Only raises top price -- to 99.99 cents

The price increases take effect later this month, and the City of Commerce chain has no plans to change its name or logo at its 277 stores.

Executives had hinted in recent weeks that inflation and higher food prices would force the chain to raise its prices. It prompted concern among customers and enthusiasm among industry analysts.

It will also add 0.99 of a cent to all prices. So an item currently priced at 39 cents will sell for 39.99 cents.

"We've absorbed it for as long as we can and as hard as we can, but we've reached a point where we can't absorb it anymore, and we have to do something," said Chief Executive Eric Schiffer. "This will give us plenty of breathing room."

Based on last year's sales, Schiffer estimated that the chain would take in an extra $12 million at the cash register.

Industry analyst Karen Short said changes like this were often essential.

"We've had a pretty abnormal inflationary period, and sticking to their strategy of 99 cents only becomes more challenging when prices are as volatile as they are," said Short, an analyst with Friedman, Billings, Ramsey & Co.

"Changing prices on items is not an attempt to move away from the strategy of helping the consumer. It's out of necessity."

The announcement was expected after the retailer -- faced with fast-rising inflation, soaring food and fuel prices and a higher minimum wage -- said last month that it was reevaluating its long-standing price strategy after two consecutive quarterly losses.

Founded in 1982 by Chairman David Gold, 99 Cents Only pioneered the single-price retail concept. The chain opened its first store in Los Angeles and has since expanded to 277 locations, mostly in California but also in Nevada, Arizona and Texas.

The deep-discount retailer, which sells groceries, household supplies and health and beauty products, remains one of the few true "dollar" stores. All items are priced at 99 cents or less, with some products grouped to sell for a total of 99 cents.

But capping prices at 99 cents plus tax had become a burden for the retailer, which had to adjust the size or quantity of many of its offerings -- including milk and eggs -- to keep them on store shelves. The strict price strategy also led to the inability to carry some high-demand items, such as butter, on a regular basis.

andrea.chang@latimes.com