99 Cents Only Stores Reports Third Quarter And The First Three Quarters Of Fiscal 2015 Results

CITY OF COMMERCE, Calif., Dec. 11, 2014 /PRNewswire/ -- 99 Cents Only Stores LLC (the "Company") announced its financial results for each of the third quarter and first three quarters of fiscal 2015 ended October 31, 2014. As previously announced, the Company changed its fiscal year from the Saturday closest to the end of March, to the Friday closest to the end of January in order to be in line with its retail industry peers. As a result of the change in the Company's fiscal year, the comparable interim prior year financial statements have been recast to conform to the new fiscal calendar. 

Financial Results

For the third quarter of fiscal 2015, the Company's net sales increased $22.7 million to $478.3 million, compared to $455.6 million in the third quarter of fiscal 2014. Same-store sales decreased 0.7%, calculated on a comparable 13-week period of the prior year.  Net loss was $3.8 million in the third quarter of fiscal 2015, compared to net income of $1.0 million for the third quarter of fiscal 2014.  Net loss as a percentage of total sales was (0.8)% for the third quarter of fiscal 2015 compared to net income as a percentage of sales of 0.2% for the third quarter of fiscal 2014.  Adjusted EBITDA was $27.1 million in the third quarter of fiscal 2015, compared to $28.3 million in the third quarter of fiscal 2014. Adjusted EBITDA margin was 5.7%, compared to 6.2% over the same period. 

For the first three quarters of fiscal 2015, the Company's net sales increased $80.4 million, to $1,414.4 million, compared to $1,334.0 million in the first three quarters of fiscal 2014. Same-store sales decreased 0.4%, calculated on a comparable 39-week period of the prior year.  Net income was $7.8 million for the first three quarters of fiscal 2015, compared to net income of $3.8 million for the first three quarters of fiscal 2014.  Net income as a percentage of total sales was 0.6% for the first three quarters of fiscal 2015, compared to 0.3% for the first three quarters of fiscal 2014. Adjusted EBITDA was $109.1 million in the first three quarters of fiscal 2015, compared to $105.1 million in the first three quarters of fiscal 2014. Adjusted EBITDA margin was 7.7%, compared to 7.9% over the same period.

[1] EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are financial measures that are considered "non-GAAP financial measures" under the Securities and Exchange Commission regulations. The definitions of, an explanation of how and why the Company uses, and a reconciliation to the most directly comparable GAAP measure of, these non-GAAP measures are included in this press release.

Store Openings

During the third quarter of fiscal 2015, the Company opened 12 net new stores.  As of the end of the third quarter of fiscal 2015, the Company operated 362 stores, an increase of 8.7% in store count over the end of the same period last year.

Operating Initiatives

During the third quarter of fiscal 2015, the Company completed the rollout of its "Go Taller" initiative, which raised the height of shelving across the chain to create a dramatic canvas for visual merchandising.  The transformation was accelerated in August and September 2014 in order to complete the conversion of the entire chain before the busy holiday season.

In addition, the Company also deployed a new centralized forecasting and merchandise replenishment system, replacing its legacy system and longstanding decentralized methodology. Similar to its Go Taller initiative, the Company also accelerated the implementation of this forecasting and replenishment system, which was also completed during the third quarter of fiscal 2015.

While the operation disruption caused by these two initiatives was anticipated, it nonetheless negatively impacted same store sales during the first two months of the quarter.

"One of our top priorities is to further establish 99 Cents Only as the preferred destination for seasonal merchandise," said Stéphane Gonthier, CEO of 99 Cents Only.  "By completing the implementations of our Go Taller program and replenishment system ahead of schedule in September, we were able to focus attention on our important seasonal programs.  We have been pleased with the results, with Halloween sales growing more than 50% over last year, leading to an increase in same-store sales of 2.9% for the month of October."

Change in Presentation of Financial Statements

In the first quarter of fiscal 2015, the Company changed the presentation of its financial statements to include receiving, distribution, warehouse costs and transportation to and from stores in its cost of sales.  Previously, these costs were included in selling, general and administrative expenses.  Depreciation expense related to these costs, which was historically included in selling, general and administrative expense, is now included in cost of sales.  Also, depreciation and amortization expense included in selling, general and administrative expense will no longer be presented separately.  Reclassifications of $26.7 million and $75.1 million from selling, general and administrative expense to cost of sales were made for the comparable third quarter of fiscal 2014 and first three quarters of fiscal 2014, respectively, to conform to current year presentation.  This change does not change previously reported operating income or net income.

This change in presentation of financial statements was made in order to be in line with the Company's peers in the retail industry.

CONFERENCE CALL DETAILS

The Company's conference call to discuss its third quarter and first three quarters of fiscal 2015 ended October 31, 2014 and the other matters described in this release is scheduled for Thursday, December 11, 2014 at 8:00 a.m. Pacific time (11:00 a.m. Eastern time). 

The live Third Quarter Fiscal 2015 Earnings call can be accessed by dialing (888) 895-5479 from the U.S.A., or (847) 619-6250 from international locations, and entering confirmation code 38620134.  Please phone in approximately 9 minutes before the call is scheduled to begin and hold for an operator to assist you.  Please inform the operator that you are calling in for 99 Cents Only Stores' Third Quarter Fiscal 2015 Earnings conference call, and be prepared to provide the operator with your name, company name, and position, if requested.  A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, December 25, 2014, by dialing (888) 843-7419 from the U.S.A., or (630) 652-3042 from international locations, and entering confirmation code 38620134#.

A copy of this earnings release and any other financial and statistical information about the period to be presented in the conference call will be available prior to the call at the section of the Company's website entitled "Investor Relations" at www.99only.com. 

Non-GAAP Financial Measures

The Company defines EBITDA as net income before interest expense (income) and other financial costs, income taxes, depreciation and amortization.  Adjusted EBITDA is defined as EBITDA for the relevant period as adjusted by the following amounts: non-cash adjustments to reserve balances, stock-based compensation, fees and expenses related to the Merger (as defined below), legal settlements, non-ordinary course store closures, and other non-cash or one-time items.  Adjusted EBITDA margin is Adjusted EBITDA divided by total sales.  Adjusted EBITDA and Adjusted EBITDA margin as presented herein, are supplemental measures of the Company's performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States of America ("GAAP").  The Company's management uses EBITDA, Adjusted EBITDA and Adjusted EBITDA margin to assess its performance and that of its competitors.  In addition, Adjusted EBITDA is used to determine the Company's compliance and ability to take certain actions under the covenants contained in the Company's debt instruments.  EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not measures of the Company's financial performance under GAAP and should not be considered in isolation or as alternatives to net income, operating income or any other performance measures derived in accordance with GAAP, as measures of operating performance or operating cash flows or as measures of liquidity.

Merger and Conversion to LLC

On January 13, 2012, 99¢ Only Stores was acquired by affiliates of Ares Management LLC, Canada Pension Plan Investment Board and the Gold-Schiffer family.  The acquisition is referred to as the "Merger." Effective October 18, 2013, 99¢ Only Stores converted from a California corporation to a California limited liability company, 99 Cents Only Stores LLC.  The term the "Company" refers to 99¢ Only Stores and its consolidated subsidiaries prior to the conversion date and to 99 Cents Only Stores LLC and its consolidated subsidiaries on or after the conversion date.

Founded in 1982, the Company operates 368 extreme value retail stores with 265 in California, 48 in Texas, 35 in Arizona and 20 in Nevada as of December 11, 2014. The Company is an extreme value retailer of consumable and general merchandise and seasonal products.   For more information, visit www.99only.com.

For further information:

Christopher A. Laurence
Interim Chief Financial Officer, Treasurer and Secretary
(323) 881-1293
[email protected]

The following tables reconcile EBITDA and Adjusted EBITDA to net income for the periods indicated:

The following tables reconcile EBITDA and Adjusted EBITDA to net income for the periods indicated:

Safe Harbor Statement

The Company has included statements in this release that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act, as amended, and Section 27A of the Securities Act of 1933, as amended. As a general matter, forward-looking statements are those focused on future or anticipated events or trends, expectations and beliefs including, among other things, (a) trends affecting the financial condition or results of operations of the Company and (b) the business and growth strategies of the Company (including the Company's store opening growth rate) that are not historical in nature.  Such statements are intended to be identified by using words such as "believe," "expect," "intend," "estimate," "anticipate," "will," "project," "plan" and similar expressions in connection with any discussion of future operating or financial performance. Any forward-looking statements are and will be based upon the Company's then-current expectations, estimates and assumptions regarding future events and are applicable only as of the dates of such statements. Readers are cautioned not to put undue reliance on such forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected in this release for the reasons, among others, discussed in the reports and other documents the Company files from time to time with the Securities and Exchange Commission, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections contained in the Company's Transition Report on Form 10-K for the fiscal year ended January 31, 2014. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 

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SOURCE 99 Cents Only Stores