99 Cents Only Stores

One claims it's the company's only chance for survival. Atari has filed for Chapter 11 bankruptcy protection. A 31 year old. . . E. W. A. presents the. . . Kodak is filing for Chapter 11 bankruptcy protection. My name is Jake and welcome to the 28th episode of Bankrupt. Since the early 1980s, many people in southern states wit A company aimed at providing cheap brand name merchandise at the gimmicky but very enticing 99c price point. But for such a simple idea, the actual effort of keeping products at that price proved to be a difficult long term challenge. And over the years, the company battled its product strategy as well as corporate takeovers. Today we're going to look into this once very promising variety store chain and cover its rise and t Use code BrightSun at the link below to get an exclusive 60% off a one year plan. It started with the son of a Jewish Russian immigrants named Dave Gold. With an entrepreneurial spirit and following The small store was located in Grand Central Market in downtown Los Angeles. It was the 1950s and for years the stand operated with fine enough success. But then Dave started trialing a new sales concept, putting items for sale at a deeply discounted rate with a particular magic n By doing so, product flew off the shelves and he soon discovered that even being a few cents off in either direction, well Merchandise that was priced at $1. 10 or even 98 cents never sold It's a weird psychological thing that just draws in cons Dave found t But Gold was seeing In 1982 Dave and It was located in Lidira Heights wit T In just two years the chain would grow to 11 locations. New store openings would pull massive crowds with newspapers The openings would give away big ticket products With a lot of success thus far Dave Gold wanted to bring the company to new heights, particularly bringing it to the stock market. Ideally as Dave insisted it would have an opening share price that ended with 99 cents. Following their IPO in 1996 the stock was a massive In just a year by 1997 99 cents' stock was up over 117% since their IPO. Investors were particularly interested in their aspirations of future out of state expansion as well as their tremendous profit margins of around 35%. As the 20th century came to a close the company had expanded to over 70 locations. The growth of the company as well as all the attention they received on Wall Street all came down to their great market position wit The 80s and 90s were a time of inflation and wage stagnation. In larger cities like Los Angeles there was a real market for cons That was especially true in lower income blue collar neighborhoods w But they also found success in other middle class and even With that level of interest and their But the golds also had a unique take on the format. Dave from the very start was very good at finding wholesale deals with products to sell in stores. He made it a priority to find brand name products that people would actually recognize. Because many of these items were sold to them cheaply from the manufacturers they were often unwanted or at the end of their season. To w Oftentimes having a revolving door of merchandise. 99 cents only stores were also on average around 16,000 square feet. More than double the average dollar general. Meaning they had even more room to sell more products as well as expand into new departments All of t With management that cultivated a positive work environments and a friendly corporate culture. By the early 2000s the brand continued to enjoy its rising sales. Now posting half a billion dollars in revenue. The company continued to expand. Now breaking into other states. Ultimately building out over 223 stores across California, Arizona, Texas, and Nevada. It was incredible growth. But not as incredible as their competition. Dollar general for example expanded with another 3,600 locations during the same period of time. A truly enormous rise. T Now expanding to 3,000 locations themselves. W Manufacturing costs were climbing. So were operational expenses as well as inflation. As a result 99 cents a stock took a Wall Street's perception of the company was now s As the company crossed the $1 billion mark in 2007, their actual operating income had continuously declined. All of these expenses damaged their bottom line. And eventually the company decided to increase their prices for the first time. The chain would close a few underperforming stores in Texas. W Growth for the company had slowed w 99 cents grappled with the increased competition and slimming profit margins. But the company wasn't losing money and they were still operating with pretty great sales for relatively small retail presence. The company also had very little debt on their balance sheet. That was apparently an attractive proposition for an acquisition. In 2011, a joint venture between Aries Management and the Canadian Pension Plan Investment Board, essentially two private equity institutions would acquire 99 cents only stores for a hefty $1. 6 billion, or around $2. 2 billion today. Though of course in true private equity takeover style, they would pass the debt over to the company that they're taking over. Regardless, t Gold had long relinquished The sale was more or less a closing chapter for the family, as Dave would step down in early 2013 and sadly pass away a few months later in April. The company was now without its original founder, and the new private equity owners did what they do best and began to lay people off. The new owners did set out for more expansion though, with hopes to build the brand and compete with the giants of the market. In just a few years, they expanded their presence by another 100 locations by 2015. Sales had followed suit to over $1. 8 billion, and w The company reported a slew of ongoing challenges, including a saturated market, difficulties inventory management, inventory loss including theft and spoilage, as well as many others. In their 2017 annual report, the last time they would publicly share financial data, they stated that, quote, There can be no assurance that we will be able to successfully anticipate changing cons And as a result, we may not successfully manage inventory levels to meet our future order requirements. Despite the company bringing in an all-time Credit agencies were starting to sound the alarms as the company losing money and seemingly hope was still saddled with nearly $1 billion of debt from their prior leveraged buyouts. They did try some restructuring and s Meanw Seemingly antithetical to the brand name of 99 cents only, shoppers began to become annoyed by the slowly increasing n In fact, you can find items ranging from $1. 99, $2. 99, $4. 99, and even $15. 99. T Cons With ongoing challenges at the company, the perception and aesthetics were cast aside, but t By the time the pandemic began, 99 cents was in a rough state. It became clear that statistically, pre-pandemic shoppers who frequented their stores were not returning Shifting cons Well, that was deadly. With 370 locations not earning as much as they did in profits, the company had no way to pay off their mountain of acc Optics also weren't great when it was discovered that their owners were also paying out around $20 million in annual bonuses in the form of dividends. That's being paid out to executives from a company that was bleeding money and had no way to pay off debt? After selling their distribution warehouse in early 2023, r To validate those r Their CEO called the liquidation a quote, extremely difficult decision and is not the outcome we had expected or hoped to ac So to the dismay of many who still shop there, all of the locations began their liquidation sales. Stores across the country then began to liquidate and shut down permanently. This was while other chains The others would either have their landlords find new tenants or simply just sit abandoned. I actually visited one of those abandoned locations in Las Vegas a few months after it closed. With all of the branding still in place, the building remarkably sat vacant and covered in graffiti. Inside, the distinctive w Overall, it's a very lonely and sad building, very emblematic of its t In the end, the story of 99 cents-only stores is sad, but also an interesting one, especially its death. It almost seems backwards how a discount retailer aimed at providing services to a budget-conscious cons But un They had enormous brutal competition, a disastrous pandemic period, Gold was notably very risk-averse when it came to debt, and he kept very little against the company during So there's a good chance they could've weathered the storm if it weren't for the over a billion dollars of debt that the private equity firms saddled the company with. If they continued on as a medi Now that brand has disappeared though, only leaving be At the end of the day, it is pretty ironic that a company selling items at 99 cents had over a billion dollars in liabilities dragging them down. So these videos take a lot of time to research, and especially with these medi By doing so, or even just by going about my daily internet habits, I'm putting my privacy at risk. Our data is always being collected in the background w Oftentimes, that leads to spam phone calls and of course spam emails. 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