After weeks of speculation and hype, 99 Cents Only Stores announced price increases Monday -- by almost a penny an item.
The chain's new top price: 99.99 cents, or essentially $1 plus tax at the cash register.
99 Cents Only has no plans to change its name or logo, Chief Executive Eric Schiffer said. The retailer's first-ever increase will take effect at all 277 stores later this month.
Shoppers were elated to find the price hike amounted to less than a penny. Forest Thurman, who was buying produce Monday at a 99 Cents Only store in Los Angeles, said he had been worried that prices would be raised to $1.49 or more.
"That's it? Whew! That's a relief," said Thurman, 33, as he high-fived another customer. "I was expecting a lot more. They had consumers on edge."
The announcement was expected after 99 Cents Only, faced with soaring inflation and higher costs, said last month that it was reevaluating its long-standing price strategy after two consecutive quarterly losses.
At a news conference Monday, Schiffer said the new strategy would allow the chain to remain loyal to the number 99 while helping offset "the increased costs of doing business."
"We've absorbed it for as long as we can and as hard as we can, but we've reached a point where we can't absorb it anymore, and we have to do something," Schiffer said to a crowd of reporters and shoppers at the chain's store on Wilshire Boulevard. "This will give us plenty of breathing room."
Schiffer didn't rule out the possibility of raising prices again in the future.
Based on last year's sales, Schiffer estimated that the price increase would bring in an extra $12 million annually.
Under the new policy, the chain will add 0.99 of a cent to all items. Most of the chain's merchandise is currently priced at 99 cents, with some items, including boxes of pudding mix and packages of ramen, offered for less.
Some analysts said they had been expecting a more significant increase.
"It's not very meaningful as it relates to the business overall. It's a 1% increase, and obviously prices for other things -- gas, food and so forth -- are rising by much more than 1%," said Patrick McKeever, an analyst with MKM Partners. "My initial take was that it was largely a publicity stunt."
Founded by Chairman David Gold, 99 Cents Only opened its first store in 1982 in Los Angeles. Its stores are mostly in California but also are in Nevada, Arizona and Texas.
The deep-discount retailer, which sells groceries, household supplies and health and beauty products, remains one of the few true "dollar" stores.
But capping prices at 99 cents had become a burden for the discounter, which had to adjust the size or quantity of many of its offerings -- including milk and eggs -- to keep them on store shelves. The strict price strategy also led to the inability to carry some high-demand items, such as butter, on a regular basis.
Ron Bookbinder, an analyst with Global Hunter Securities, said he worried that the paltry price increase wouldn't help the company expand its selection.
"I don't believe there are items out there that they couldn't sell for 99 cents but that they could sell for 99.99 cents. So we were disappointed," Bookbinder said. "We believe it could have gone further."
Shares of 99 Cents Only rose 45 cents, or 5%, to $9.53 on Monday before the announcement.
Victor Cannon, a construction manager who was at the Wilshire Boulevard store buying groceries, said the price increase was understandable given the current economy.
"Compared to gas and everything else going up," Cannon, 39, said, "a penny is the least of our concerns."