The 99 Cents Only Stores bankruptcy filing and store closures is just the most recent report of another bargain retailer succumbing to the combination of high inflation and subpar sales revenue. Known for their fixed price point of 99 cents, the store has been the go-to destination for value-conscious consumers.
While retailers are going belly up left and right these days, the 99 Cents Only Stores’ untimely demise is bound to have a significant impact. Ramifications of the retailer’s closures will extend beyond the confines of its glass storefront, reaching deeply into the communities it once served and affecting consumers grappling daily with food insecurity.
Established in 1982, the 99 Cents Only stores has grown to 371 locations spread across California, Nevada, Arizona and Texas. Over the past 10 years, they have expanded their consumable products to include fresh produce, cold and frozen items. Offering a wide assortment of products and fresh produce, the retailer has not been immune to the raising costs of goods and services in recent years. Due to persistent high inflation and an unsustainable business model, the company filed for Chapter 11 bankruptcy protection in Delaware on April 7, 2024. Currently in the process of liquidating inventory, attempting to sell real estate and lease assets and closing down stores, the sale hearing is set to take place May 23, 2024.
Before facing turbulent economic conditions, the 99 Cents Only stores had evolved into the ideal value grocer for consumers on fixed and low incomes. While consumers globally have experienced exuberant price increases on everyday goods and services, food costs in the U.S. have increased rapidly over the past few years. According to the U.S. Department of Agriculture’s Economic Research Service, the all-food Consumer Price Index (CPI) rose by 25 percent between 2019 and 2023. Much of the food price increase between 2020 and 2021 can be attributed to the COVID-19 supply chain disruptions and changing consumption patterns. However, in 2022, food prices continued to increase and at the fastest rate since 1979. Unfortunately wages have not picked up as much steam, creating financial challenges for many Americans.
While the retailer’s bankruptcy is devastating news for their 10,800 employees, the store closures also creates additional financial strain on households relying on the retailer for deeply discounted food products and general merchandise. The company’s customer profile has mainly consisted of budget-conscious consumers with several of the stores being located in lower-income communities. According to ESRI, the median household income in a 3-mile radius of the store located at 3835 Blue Diamond Road is $83,000, which is substantially higher when compared to several of the other 99 Cents Only stores locations. For example within a 3-mile radius of 1155 E. Charleston Blvd. the median household income is $40,000 and for 1325 E Flamingo Road it is roughly $41,000. While the locations at 41 N. Nellis Blvd. and 3258 N. Las Vegas Blvd. incomes are slightly higher at $43,000 and $49,000, annually. It’s also worth noting that the trade areas mentioned with median household incomes of less than $50,000 annually have a demographic ethnic population of anywhere from 40 percent to 63 percent Hispanic. In comparison to the Blue Diamond location, which has an ethnic composition of 40 percent Caucasian and only 20 percent Hispanic. Based on the demographic and income comparison data, the retailer’s store closures will not only disproportionately affect lower-income households, but also minority communities.
In the Las Vegas, the bargain retailer is looking to sell the real estate located at 716 S. Boulder Highway, which consists of 38,000 square feet. With leased store sizes ranging from 17,000 square feet to 30,000square feet, 99 Cents Only stores hopes to assign several of their existing leases to other retailers. However, their fate hangs in the balance, subject to the approval of the bankruptcy court. As the court’s decision looms and the retailer prepares to reject certain leases, it’s likely numerous existing locations will soon become available for lease. With an average square footage of 22,000, there are a limited number of discount grocers that could backfill these locations in communities where some households struggle with food insecurity and many rely on lower-priced consumer packaged goods. Grocers Aldi and Grocery Outlet require smaller footprints, offer value-oriented consumable goods, and would make ideal retailers to occupy the former 99 Cents Only stores. Several of the locations also would be well-suited for regional ethnic grocers with a smaller footprint.
The unfortunate departure of the single-price-point retailer presents challenges for both budget-minded consumers and landlords grappling with vacant mid-sized boxes. However it also creates space for innovation and opportunity. Regional retailers that are eyeing expansion into the Las Vegas market have an opportunity to secure multiple locations simultaneously giving them an immediate presence in the market and brand recognition. It’s a chance for established local brands to broaden their presence by either expanding their number of locations or increasing their footprint. For instance, Mario’s Westside Market successfully expanded into a former 12,000-square-foot CVS at the corner of West Lake Mead and Martin Luther King boulevards. Landlords will need to adopt innovative strategies to attract suitable tenants to fill their vacancies. Retailers providing experiential activities like trampoline and laser tag parks have gained traction in recent years and could see these mid-sized spaces as a perfect match.
While property owners work to backfill their vacant boxes and the retailer continues through the grueling bankruptcy process, many households are grappling with how to afford everyday groceries from conventional supermarkets. For decades, the 99 Cents Only stores’ price friendly offerings have helped underserved and low-income communities stretch a dollar. The retailer’s contributions and philanthropy programs across multiple states should not be overlooked or undervalued. With above-average inflation, stagnant wages and one less value grocer in Las Vegas, the store closures will be deeply felt far beyond the store’s glass front and in some of our most vulnerable communities.
Amelia Henry, CCIM of the Henry Retail Group, is the vice president of Retail Investments at SVN The Equity Group. She specializes in investment sales along with landlord/tenant representation. Henry and her team represent a multitude of clients, both private and corporate, preferred developers, private equity groups, franchisors, franchisees, and build-to-suit specialists. In the past five years, Amelia has closed over $300 million in commercial real estate transactions.
