99 Cents Only: 'Great Negotiating Leverage'

LOS ANGELES — Dollar stores like 99 Cents Only have a negotiating advantage over supermarkets because they can drop products if vendor prices get too high, Eric Schiffer, chief executive officer, told analysts during a conference call here Monday.

LOS ANGELES — Dollar stores like 99 Cents Only [4] have a negotiating advantage over supermarkets because they can drop products if vendor prices get too high, Eric Schiffer, chief executive officer, told analysts during a conference call here Monday.

"The beautiful thing about our concept is, we don't have to carry any one item. If a supermarket doesn't carry certain basic key items, people would go to another market. But we don't have to carry any one item, so we can use that as great negotiating leverage with our vendors.”

Dropping an item may have a temporary impact on sales, he said, "but I think our customers understand. And we can get those items back in or stave off price increases when you can just drop an item, whereas a supermarket or a drug chain probably couldn't."

With prices escalating, Schiffer said the chain may also consider increasing prices above 99 cents on certain items, as it's done with milk in Texas, "as long as everything is priced at a good-to-great perceived value to our customers."

Net income for the 13-week first quarter rose 5.4% to $17.7 million, while sales jumped 6.3% to $378.3 million and same-store sales were up 5.9%. The company said the shift in Easter accounted for approximately 3.2% of the comp sales increase.

Jeff Gold, president and chief operating officer, said the increase in comps was driven "much more by growth in the number of transactions than by the transaction size, which suggests the increase came more from greater numbers of visits."