Heartfelt Obituary For 99 Cents Only Stores Leaves A Few Things Out
Like why they actually went out of business.
99 Cents Only, a chain of stores that sells merchandise for 99 cents only, is closing. I didn’t know they existed prior to today, so I don’t really have too many feelings on the subject. Or I wouldn’t were it not for a gauzily ridiculous LA Times story on the rise and fall of the retail chain that came out this week.
I feel like, by now, we all know that dollar stores in general are seriously problematic, for the ways they are run, their tendency to run up piles of OSHA complaints, and the fact that they tend to be most prevalent in areas where there are not a lot of traditional grocery stores — and their presence frequently drives out independent grocers, which contributes to these areas becoming food deserts.
Well, those of us who have seen this segment from “Last Week With John Oliver,” anyway.
In Chicago, we just recently passed some regulations barring chains from having two of the same store within one mile of each other — with exceptions made for those that set aside 10 percent of their store for fresh fruit, vegetable, meat, and dairy products. Other cities have passed similar measures, hoping to keep these stores from saturating their communities.
And in fact, the 99 Cent Only store did carry fresh food and produce — even organic!
Now, all 371 stores are liquidating after the City of Commerce company abruptly announced last week that it was going out of business. It’s a stunning fall for the beloved chain, whose stores are primarily located in urban areas and underserved communities, many of which lack close access to traditional grocery stores.
So why are they closing?
What happened? Company executives and industry analysts blamed a series of factors, including the COVID-19 pandemic, escalating theft and crime, competition, big increases in operating costs stemming from high inflation and the expense of servicing its debt. The company also cited significant minimum-wage jumps, particularly in California, where 265 of its stores are located.
“The last several years have been extremely difficult,” Chief Restructuring Officer Christopher J. Wells said in a bankruptcy declaration filed Monday. “The company had no choice but to pass on to its customers some of the resulting costs, in the form of higher prices, which was met by significant customer resistance and reduced customer traffic.”
Those are definitely some theories. However, one need only scroll down 15 or so paragraphs further to come upon the actual reason why the stores are going out of business. They were purchased by a private equity firm that then turned around and expected them to pay them back for buying the chain, leaving them saddled with a ridiculous amount of debt! More debt, even, than could conceivably be caused by people shoving tiny deformed statues of Jesus, bags of purse candy, or bottles of Salon Selectives into their handbags. I don’t actually know that they sell Salon Selectives but that was the last thing I bought at a dollar store several years ago, because my sister and I just really needed to find out if it smelled the same (IT DOES).
Leonard Green & Partners offered to take the retailer private, in a deal that valued the company at $1.3 billion, but was topped by Ares and its pension fund partner. It was a period when investors were eyeing dollar stores that had grown in popularity during the Great Recession. […]
The deal — which valued 99 Cents Only Stores at $1.6 billion — saddled the company with a debt load that turned a "conservative balance sheet" into a "highly leveraged capital structure," Standard & Poor's Rating Services said in a report.
The company struggled with debt for years. Its financial position continued to erode even after it sold a City of Commerce distribution center last year for $190 million, then leased it back, to raise capital, according to S&P Global Ratings.
So, just to be clear, the company was struggling when the minimum wage was quite low and well before the onslaught of this supposed shoplifting craze — which perhaps suggests that they didn’t have a damn thing to do with why the store was failing. Additionally, while most of their stores were in California, many of them were also in Texas, where the minimum wage is still only $7.25. It’s not like they just closed the California stores.
The narrative of “This company did so much for poor people by taking their money, and then they get paid back with shoplifting and having to pay their employees fairly?!?” is clearly an appealing one. It’s easy to blame poor people for things, especially for those who rarely have to interact with them, even just to get some quotes from said employees for a sweet little puff piece.
But it wasn’t the little guys what done them in, it was the big guys. Also, there is a small possibility that selling the same things at the same price point for 40 years is not actually a sustainable business practice.
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That's how the game is played - buy up a company with decent cash flow, load it up with debt, then liquidate it when the bill comes due and blame labor costs and "theft". Profit!
I'm getting really sick of the corporations playing pretend with this whole shoplifting crap. We fucking see you, assholes. We fucking see you.