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The fourth-largest dollar store chain in the U.S., 99 Cents Only, said last week that it would delay the filing of its annual report with the Securities and Exchange Commission, but did provide preliminary results for its fiscal 2013 campaign.
The company said in a news release that it was reviewing its inventory valuation related to the January 2012 acquisition of the company, along with compensation accounting for certain former executive officers. The review of those is the source of the delay in filing its annual 10-K report, and the company said that although they are expected to have a negative impact on gross profit margin, it “expects to treat each of the foregoing items as a non-recurring adjustment to EBIDTA.”
In addition, changes in how the company estimates excess and obsolete inventory is expected to bring a $10 million one-time charge to its fiscal fourth-quarter earnings for 2013.
Based on preliminary results, 99 Cents Only saw total sales rise 9 percent to $1.7 billion in fiscal 2013, with same-store sales up 4 percent. Fourth-quarter total sales rose 9.7 percent, with same-store sales up 4 percent in the quarter. Because fiscal 2013 included two Easter holidays rather than one in fiscal 2012, the company estimates the extra holiday lifted same-store sales 0.5 percent for fiscal 2013, and fourth-quarter same-store sales up 1.9 percent.
Easter is the busiest selling week for 99 Cents Only stores, the company said in the release.
Related to the change in how the company estimates inventory, it announced that it was upgrading systems to allow tracking of inventory at retail stores by SKU on a perpetual basis, the first time it will have that capability. The implementation of the tracking will begin in fiscal 2014 and finish by the end of fiscal 2015, the company said.
A review based on initial work with the new tracking system found that the company might have overstated total inventory by as much as $20 million, accumulated over time. That also is part of the delay in the 10K filing.
The company has 316 stores in California, Texas, Arizona and Nevada.