Tags: 99 | NDN | weak | consumer

99 Cents Only Thrives on Weak Consumer

By    |   Monday, 17 Oct 2011 04:25 PM

The economy’s continued stagnation represents something of an opportunity for 99 Cents Only Stores (NDN), which sells brand-name merchandise for under a dollar. Consumers are trading down in the weak economy, driving traffic to the company’s stores.

Groceries account for about 55 percent of 99 Cents Only Stores revenue, giving it an advantage over some of its competitors. National chains Dollar General (DG) and Family Dollar (FDO) count as two of the company’s rivals. Most 99 Cents Only Stores locations are in Southern California, with others in Nevada, Arizona, and Texas.

In March the Schiffer-Gold family, which founded the company, and private equity firm Leonard Green & Partners offered to take the company private for $1.34 billion. But in August it was reported that Apollo Global Management may top that offer. Even the Schiffer-Gold bid at $19.09 per share exceeds the company’s recent stock price. So the share price would seem to have some room to rise.

For the quarter ended July 2, 99 Cents Only Stores reported net income of $17.7 million, up 5 percent from $16.8 million a year earlier. Revenue gained 6 percent to $368.3 million.

Undervalued

Standard & Poor’s analyst Jason Asaeda has a four-star buy rating on 99 Cents Only Stores shares, upgrading his rating in August to reflect what he viewed as an undervalued price.

Analysts have a consensus forecast for a 4 percent gain in sales for the fiscal year ending in March, Asaeda says. “We look for growth to be supported by a low single-digit same-store
sales gain and expansion,” he writes.

“We see potential for NDN to drive increases in both store traffic and average transaction value with its wide assortment of consumables and an expanded offering of non-food items. We expect total retail square footage to increase about 5 percent, based on the company's plan to open 16 new stores, the majority in California.”

The company next reports around Nov. 7.



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The economy s continued stagnation represents something of an opportunity for 99 Cents Only Stores (NDN), which sells brand-name merchandise for under a dollar. Consumers are trading down in the weak economy, driving traffic to the company s stores. Groceries account for...
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Monday, 17 Oct 2011 04:25 PM
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