Analysis 99 Cents Store

The analyses of case: 99 Cents Only Stores: IT Infrastructure on a Budget.

For this case analyses the following steps were followed:

 To identify the most important facts surrounding the case.

 To identify the key issues.

 To specify alternative courses of action.

 To evaluate each course of action.

 The recommendation of the best course of action.

The identification of the most important facts:

1. 99 Cents Only Stores is one of the leading retailers in the deep discount market. The deep discount industry is characterized by the purchase of close-out and special opportunity merchandise at costs below wholesale. Deep discount retailers pass the savings on wholesale from these purchases to customers.

2. 99 Cents Only Stores, experienced excessive growth since its establishment. The company now owns 303 extreme value retail stores throughout the USA (2012).

3. This company also experienced growth in its revenue. Its financial position in 2012 can be described as follow (source: www.istockanalyst.com):

a) Expectations

Wall Street analysts are expecting the company to report earnings of 41 cents a share on revenues of $393.08 million. While earnings projection indicates 7.89 percent growth, analysts project 7.6 percent growth in revenue.

b) Second Quarter Results

99 Cents Only Stores reported net income of $15.1 million or 21 cents a share on revenues of $363 million, higher than $12.9 million or 18 cents a share on revenues of $333.6 million in the year ago quarter. While profit growth was 17 percent, revenue witnessed 8.8 percent upside from the previous year quarter. Street analysts had estimated the company to earn 22 cents a share on revenues of $358.64 million. While releasing second quarter numbers, 99 Cents Only Stores indicated that its revenue growth would be guided by the increased same-store sales. The company had also lifted its same-store sales for fiscal 2012 to mid-single digits.

c) Earnings History

99 Cents Only Stores failed to meet analysts' earnings expectations in the last three quarters and in the second quarter of the previous year, it could match analysts' projection. Interestingly, during the last 60 days, analysts' have lifted their earnings projection of the company by a cent to 41 cents a share from 40 cents a share. In the second and first quarter of current fiscal year, the company earned 21 cents and 25 cents a share respectively and in the previous year's fourth and third quarter, the earnings per share was 25 cents and 38 cents respectively.