In a significant blow to the discount retail sector, 99 Cents Only Stores, a prominent discount chain, announced on Thursday that it will close all 371 of its outlets, marking the end of its 42-year retail run. The company cited a combination of the COVID-19 pandemic, shifting consumer demand, persistent inflation, and rising levels of shrinkage as the reasons behind the decision.
“This was an extremely difficult decision and is not the outcome we expected or hoped to achieve,” said Mike Simoncic, the interim Chief Executive of 99 Cents Only Stores. He added that the challenges of the past few years, including the pandemic and macroeconomic headwinds, have "greatly hindered the company’s ability to operate."
The company, which has stores in California, Arizona, Nevada, and Texas, and employs about 14,000 people, has reached an agreement with Hilco Global to liquidate all of its merchandise and dispose of fixtures, furnishings, and equipment at its stores. The sale of the company’s real estate assets is being managed by Hilco Real Estate.
The closure of 99 Cents Only Stores is indicative of a larger weakness in the dollar-store category. Last month, Dollar Tree, another discount retailer, announced that it was closing 600 of its Family Dollar stores this year and an additional 370 in the next few years.
The discount retail sector has been grappling with rising wages, inflation, and higher losses due to shrinkage, which have reduced profits in a sector where margins are already extremely low. 99 Cents Only, with its large base of California stores, has been under particular wage pressure.
The company was founded in Los Angeles in 1982 by David Gold, who popularized the single-price retail concept. Over the years, the chain has been a beacon for bargain hunters, offering a wide range of products, from groceries to household supplies, all priced at 99 cents or less.
However, the company had to stray from its long-standing price strategy in 2008 due to fast-rising inflation, soaring food and fuel prices, and a higher minimum wage. In 2011, the company was sold in a deal valued at about $1.6 billion, reflecting the growing popularity of dollar stores during the Great Recession.
The closure of 99 Cents Only Stores will leave a number of large vacant properties in prime locations, adding to the growing list of major retailers announcing store closures in the region. The decision to close the chain has been described as "very sad on many levels" by Howard Gold, one of David Gold’s sons and a former executive at the company.
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