July 11, 2009 / 2:53 AM / 10 years ago

99 Cents CEO "confident" new shoppers will stay

LOS ANGELES (Reuters) - Discount retailer 99 Cents Only Stores NDN.N expects that middle and upper income customers who helped boost its first-quarter sales will continue shopping there after the recession, the company’s chief executive said on Friday.

“We’re seeing a lot of middle to upper income customers come into the store for the first time or expand what they buy in the store. I am confident that when the recession ends, we will be able to retain them,” Chief Executive Eric Schiffer told Reuters on Friday.

The Commerce, California-based company reported better-than-expected sales on Thursday, as more shoppers looked for low-cost groceries and other items.

The discount retailer’s sales increased 9 percent to $332.1 million for the quarter ended June 27. Its overall same-store sales increased 7.2 percent in the quarter. Same-store sales at its struggling Texas stores rose 23.6 percent in the quarter. In May, the company put plans to exit Texas on hold.

Schiffer said store managers have spotted what appear to be more middle and upper income shoppers at their registers.

“You can tell a lot about how busy a store is by the number of cars in the parking lot and also about the shoppers by the kind of cars that you see in the parking lot, too,” he added.

“If somebody is coming in a Mercedes or a BMW or a Lexus, we’re making an assumption. But it seems to be a pretty good assumption,” Schiffer said.

Customers will continue to shop in their stores because they sell “things that people need,” he said, adding “I think people are finding that ‘Why should I pay more?’”

He said the chain was comfortable with its merchandise mix and would focus on its existing strategy: “beautiful clean stores with great merchandise.”

The chain’s roll-out of organic food items in the last year appeals to its new, more affluent customers, and over time more shoppers will want to buy green and organic, Schiffer said.

The company ideally locates a store on the fringe of an upscale area so shoppers with more income feel comfortable going there, he said.

That strategy has worked well for its store a few blocks from Beverly Hills, which has consistently posted the highest sales volume in the company’s chain — more than $11 million in 2008.

The U.S. company, with 271 stores, plans to open 10 to 12 stores this year, with all but two in California. Next year it expects to open 15 to 20 stores, also primarily in California.

The retailer, with “no debt and a lot of cash,” pays for its store investments itself. Schiffer did not disclose how much the upcoming capital expenditure would be.

Schiffer said the company is in a “great cash position” to take advantage of real estate deals, whether to lease or own. The company owns more than 15 percent of its store locations.

Reporting by Laura Isensee; Editing by Gary Hill

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