It would make sense that a retailer called 99 Cents Only Stores (NDN) would do well during a recession. And, it has. It recently reported earnings for its first quarter fiscal ending June 27. Revenue rose nine percent to $332 million. Same-store sales for the period were up seven percent.
But, what happens to an ultra-discount chain when the recession ends? The CEO of 99 Cent Only Stores says that higher-end shoppers who have been forced into its outlets will keep coming. According to Reuters, Chief Executive Eric Schiffer said, "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." If Schiffer it right, it will be a sea change in American's shopping habits.
The people who spent their time at chains like Macy's (M) have, in many cases, moved to Wal-Mart (WMT) for retail shopping needs. Typically, as the economy improves and employment and wages go back up, these people would return to large middle-tier retailers. But this recession may vicious enough to change that. So many people are out of work that they may be very tentative in their shopping habits when they finally find jobs. Even people who are employed are still facing, in a lot of cases, large credit card balances. They can no longer rely on the value of their homes to bail them out.
Firms like 99 Cents Only Stores and Wal-Mart may have unexpectedly picked up new customers who will stay with them for years.
Douglas A. McIntyre is an editor at 24/7 Wall St.