One of the oldest single-price retail chain in the country – 99 Cents Only Stores (NYSE:NDN) too has come under the inflationary pressures. The company has announced that it will increase its signature pricing model to 99.99 Cents, just managing to be below the psychological one dollar mark. The recent earnings statement of the company indicates an increase of 4.1% to $304.9 million in sales as compared to last year. Also, the expansion plans of the company reiterate the strong business story lined up for the firm. The Company opened eight new stores during the first quarter of fiscal 2009, bringing its store count at quarter end to 273 stores. For fiscal 2009, they plan to open approximately 19 new stores. The company has held its price policy unchanged for 26 years. The markets have cheered the price policy shift and the stock has seen an upside of 8.8% in the past four trading sessions.
The company's competitor - Family Dollar Stores (NYSE:FDO) which has a similar business model too has been witnessing a rally, over the past four trading sessions and is up by 5.13%. We have more examples of discount stores that seem to be finding more relevance in the existing market conditions. Dollar Tree (NASDQ: DLTR) in its recent earnings statement reported a net increase of 15% in fiscal second-quarter net income as sales rose, though margins dipped amid a merchandise shift. Big Lots ( NYSE: BIG) the Columbus, Ohio, closeout retailer, reported fiscal second-quarter net income rose 11% on 1.9% revenue, and it lifted its estimate of earnings from operations for the full year. Big Lots shares had gained more than 95 percent since the start of the year. Big Lots sells merchandise that other outlets were not able to clear out. As the market witnesses order cancellations or those with piled up inventories end up as an advantage for companies such as Big Lots.
Various economic indicators have been signaling a slump in consumer spending. The Commerce Department reported on August 29 that July consumer spending rose a modest 0.2 percent, down from the 0.6 percent in June. Furthermore, the department said the June and July figures were skewed by a large rise in inflation during those months which in turn raised prices, thus raising consumer spending data. Inflation-adjusted data showed a 0.4 percent drop in July consumer spending and a 0.1 percent drop in June spending.
The budget stores of the likes such as 99 Cents Only & Family Dollar Stores seem to be a much prevalent answer to the statistics atleast till the economy cools off a very dicey business cycle.
Disclosure: The author does not own any stocks mentioned in this article.
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