Earnings Release Delayed by 99 Cents Only Stores
99 Cents Only Stores Inc. on Wednesday delayed the release of its earnings after the Securities and Exchange Commission questioned the way the retailer accounted for the sale of a division in 2000.
The deep discounter said federal regulators had questions related to the sale of Universal International, a chain the firm had acquired in 1998 for $17 million. 99 Cents Only Stores said the inquiry could affect results from 2000 on, but that any potential action would be “non-cash in nature and would not affect the net worth of the company.”
The news initially sent the stock of the retailer, which is based in City of Commerce, plunging nearly 8%, although shares later recovered to close up 22 cents at $25.57 on the New York Stock Exchange. The stock is down 29% from its high of $36 a share in July.
Wall Street analysts said there was some early concern about the SEC inquiry, but they were soothed by the company’s reassurances and the small size of the transaction.
“Even if you craft a worst-case scenario, I doubt this would be material to investors. Based on what we can see, the magnitude is small,” said David M. Mann, an analyst who follows 99 Cents Only Stores for Johnson Rice & Co. in New Orleans. “We believe all aspects of that transaction were arms length.”
Like other deep-discount retailers, the 99 Cents Only chain has benefited in recent years from the economic slump and Americans’ insatiable appetite for bargains.
It was unclear when the company, which operates 191 stores nationwide, would officially release its fourth-quarter and full-year results or reschedule its conference call with analysts. Calls to Andy Farina, the company’s chief financial officer, were not returned.
On Wednesday, 99 Cents Only Stores did release some unofficial numbers, detailing that an increase to its California workers’ compensation reserve was expected to hurt per-share earnings by 4 cents to 7 cents a share in the fourth quarter. Excluding those items, it said fourth-quarter earnings would have been about 27 cents a share, which would have surpassed analysts’ expectations of 24 cents a share.
For the fourth quarter, the chain said retail sales rose 18.9% to $236 million.
The discounter also divulged that it planned to open 48 new stores this year: 24 in Texas, 17 in California, 6 in Arizona and 1 in Nevada.