99 Cents Stores’ Finance Chief Steps Down
Discount retailer 99 Cents Only Stores said that its chief financial officer and two company directors resigned. Shares dropped nearly 7%.
James Ritter, who took the post of finance chief Dec. 16, told the retailer that he was resigning for personal reasons, 99 Cents Only Stores said in a statement released late Tuesday, one day after it had warned that it might have to restate financial results.
The discounter said directors Ben Schwartz and Howard Gold quit because the New York Stock Exchange had determined that the two couldn’t be considered independent under NYSE rules.
The City of Commerce-based company’s stock fell 95 cents, or 6.7%, to $13.25 on the New York Stock Exchange after dropping as low as $12.40. 99 Cents Only Stores operates 223 stores in California, Texas, Arizona and Nevada.
On Monday, 99 Cents Only Stores reported it was postponing the release of its 2004 fourth-quarter earnings, saying irregularities in its accounting of depreciation and lease agreements might force the company to restate information in previous filings. However, the company said, the potential adjustments would have no significant effect on cash flow, revenue or same-store sales.
In addition, the company’s accountants maintain an “adverse opinion on the effectiveness” of internal financial controls, the retailer said.
99 Cents Only Stores has hired a search firm to find a new finance chief and “will continue moving forward in building a first-class management team and infrastructure to support future growth,” Chief Executive Eric Schiffer said in Tuesday’s statement. “Our company remains profitable with a strong cash position and balance sheet.”
Company executives didn’t return calls seeking comment Wednesday.
The company said that board member Schwartz resigned because payments to a business owned by Schwartz’s son meant that Schwartz couldn’t be considered an independent director. NYSE rules require boards to have a majority of independent directors.
Gold, son of company founder Dave Gold, resigned so that the company could keep a majority of independent directors after Schwartz’s resignation. The company said it would reinstate him when an independent replacement is found for Schwartz.
Analyst James Ragan of Crowell, Weedon & Co. said 99 Cents Only Stores grew quickly during the 1990s but suffered in recent years because its distribution infrastructure didn’t keep pace.
“Certainly 99 Cents has been struggling for a while and [Ritter’s resignation] raises some concerns,” he said.
The company’s profit for the last four reported quarters have fallen precipitously on a year-over-year basis. For the third quarter, 99 Cents’ net income dropped to $4.7 million, down 61% from third quarter 2003.
