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99 Cents Only Stores Reports Lower 3Q Earnings, Executive Changes

CITY OF COMMERCE, Calif. - 99 Cents Only Stores yesterday posted net income of $4.7 million for the quarter ended Sept. 30, down from $12.1 million for the third quarter of 2003. Earnings per share were seven cents for the third quarter of 2004, vs. earnings per share of 17 cents for the third quarter last year. Earnings per share for the nine months ended Sept. 30 were 23 cents, compared with 57 cents in 2003.

The company also said yesterday that Dave Gold, 99 Cents Only Stores' founder, chairman, and c.e.o., will step down as c.e.o. as of Jan. 1, 2005, but will stay on as chairman. Gold said in a statement: "I am pleased to announce that Eric Schiffer, our president, will become c.e.o. and chairman of the executive committee of the board and that Jeff Gold, our s.v.p. of real estate and information systems, will become our president and c.o.o. effective Jan. 1, 2005."

99 Cents Only further revealed yesterday that it had hired Mike Zelkind, "an experienced supply chain executive," to the new post of e.v.p. of supply chain and merchandising. Zelkind most recently served as v.p. of inventory management and supply chain systems for the retail products group division of ConAgra Foods.

Third-quarter retail sales for 99 Cents Only Stores were $229.1 million, a jump of 14.2 percent from sales of $200.6 million during the same period last year. Sales increases in the food and beverage categories made up two-thirds of the retail sales dollar growth. Third-quarter 2004 total sales, including wholesale sales, were $239.0 million, a rise of 13.0 percent over the previous year.

Same-store sales for 99 Cents Only Stores edged up 0.5 percent for the quarter. The number of comparable-store sales transactions accounted for the rise in the third quarter 2004 same-store sales.

Total sales for the nine months ended Sept. 30 were $706.3 million, an increase of 14.8 percent over last year. Total retail sales for the first nine months of 2004 were $674.8 million, a surge of 16.3 percent over last year. Same-store sales for the nine months ended Sept. 30 declined 0.6 percent.

99 Cents Only's Bargain Wholesale division reported third-quarter sales of $9.9 million, compared with $11.0 million last year. The division's sales accounted for 4.1 percent of total third-quarter sales. Wholesale sales for the first nine months of 2004 were $31.5 million, as opposed to $34.7 million last year.

"Our primary focus through 2005 is improving results of operations and enhancing management and systems infrastructure to support greater growth in future years," noted Schiffer in a statement. "We plan to slow down our 2005 store openings, which will help allow us to concentrate on our primary focus." According to Schiffer, the company has plans to open three stores in the fourth quarter, two in California and one in Arizona, and at least 25 stores in 2005, mostly in those two states, which contain its core markets.

Schiffer continued: "A high priority for the fourth quarter of 2004 through 2005 is to continue to work to improve the performance of our Texas stores ... [We] hired a Texas-based senior merchandise buyer for the Texas operation to help source perishables and other products locally and to enhance our merchandising and marketing efforts. We have also leased a portion of the excess capacity in our Texas warehouse, which will help to offset fixed overhead.

"We believe the gross margin decline resulting from the increased concentration in the food and beverage categories could be partially offset over time by opportunities in other product categories, improvements in our execution, and initiatives to reduce inventory shrink," he added. "We expect that our import program for the upcoming Christmas holiday season will provide a better selection of new items, which should help increase sales of these products."

99 Cents Only operates 218 retail stores in California, Texas, Arizona, and Nevada, as well as a wholesale division, Bargain Wholesale. The company's newest store opens today in Tucson, Ariz. at 4160 Ina Road at Old Father Road.
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