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The Honolulu Advertiser
Posted on: Tuesday, September 9, 2008

Top price at 99-cent retail chain edges closer to $1

By Andrea Chang
Los Angeles Times

99 Cents Only Stores announced price increases yesterday — by almost a penny an item. The chain's new top price: 99.99 cents, or essentially $1 at the cash register most of the time.

The price increases take effect later this month, and the chain, based in City of Commerce, Calif., 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 it to raise prices. That prompted concern among customers — and enthusiasm among industry analysts.

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

The company's chief executive, Eric Schiffer, said, "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. This will give us plenty of breathing room."

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

Industry analyst Karen Short said such changes often were 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," she said. "It's out of necessity."

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

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

The deep-discount retailer sells groceries, household supplies and health and beauty products, and it remains one of the few true "dollar" stores.