The 99 Cent Store Has Filed For Bankruptcy

May 20, 2024 | Bankruptcy, Chapter 11 Bankruptcy

When you first started learning about money, that little plastic cash register with the plastic coins wasn’t the best teacher. Unfortunately for a lot of us, neither were our teachers in school.

At some point we understood money – the counting part at least – but the economics of money get a little more complicated than just addition and subtraction. We are handicapped in a way, by our own lack of cognitive sophistication. We aren’t all little Einsteins after all.

It’s Simple Economics, My Son

Selling used items illustrates this for us well. Your young son buys an X-Box game with his allowance. Six months later there’s a new version of it, so naturally he wants to trade or sell his current game so he can get the new one. Since he bought it for $30.00, he assumes he can sell it for $30.00. He doesn’t quite yet understand that a used game, (and an older version at that), is not going to bring in as much money as he paid for it. It’s simple economics, and yet not so simple if we are too young to get it.

Once we grasp that concept, inflation is the next one we’ve got to face. Here’s how it usually happens.

Grandpa Knows Best

Growing up, did you have a parent that said things like, “A dollar sure doesn’t buy what it used to. Back in my day I could get an entire chicken dinner at the local diner, and the only tip I had to leave the waitress was some good advice!”

Now that might be a bit of an exaggeration, like the proverbial walk to school that was uphill both to and from school (hint – in case you think that’s possible, it isn’t unless you plan to violate three dimensional geometry). And of course there was a foot of snow on the ground, even in June.

Inflation is an inevitable part of virtually any economic system. Nothing is going to cost the same as it did 50 years ago. Hopefully the average wage keeps pace with the inflation. That’s the real measure of what people can afford when they go to buy a car or a loaf of bread.

Is Your Income Keeping Up With The Changes?

Unfortunately, when we see reports of inflation, we seldom see wage statistics paired with them. This means we are relatively in the dark regarding how far our dollar will go if we decide to go shopping tomorrow morning.

There’s one thing we can be nearly certain of, when we see something we all use (like groceries) go up in cost 40% a year, it’s going to outpace the increase in wages. Have you ever heard a news story proclaiming that across the board, we’re earning 40% more this year than last year? No – you haven’t – because it hasn’t happened – ever.

So whenever you hear about the prices of things going up by double-digit percentages, you will know that it’s going to be more difficult for the Average Joe to go out and buy what he wants or needs.

So maybe gramps liked to complain (and maybe he did it all the time), but it doesn’t mean he was wrong every time he bumped his gums. Just like a stopped clock is right twice a day, gramps most certainly was right too. When prices go up quickly, wages don’t follow, and we get sad, because we come back with so much less when we go shopping.

What’s Walmart Going To Do Now?

When prices go up, we naturally think about what we can buy and what we can’t. For a lot of us, that’s where we stop. We don’t give it another thought beyond how it affects our own wallet.

But there’s another part of the story. What happens to the guys you buy the stuff from? That car dealership is going to have a hard time selling cars when the prices are through the roof. That cheap dinner at your local Italian spot isn’t so cheap anymore. Now it’s as expensive as the fancy place down the street. Or is it? His prices went up too.

The fact of the matter is, just like it’s expensive for you when prices go up, it’s expensive for the businesses too. They’ve got to get their goods from somewhere after all. And the place that produces the stuff they use, like tomatoes and flour, has to spend more too. The fuel, the equipment, the fertilizer, it all goes up. With costs going up,they eventually have to pay their employees more. In order to do that, their prices go up. This passes the expense on down the line to everyone involved, including you. Inflation affects every facet of the economy, from the top to bottom.

What About My 99 Cent Stuff?

So this brings us around to the 99 cent store. It was recently reported that they will be closing all             371 of their stores in the United States and they will be selling all of their inventory and assets.

In case you’ve been living under a rock, the 99 cent store sells most things for 99 cents. Apparently this is a real bargain compared to the Dollar Store, which really sticks it to its customers by charging an entire dollar for their products.

All kidding aside, the 99 cent store sells a little bit of everything you need for your home. They’ve got some clothes, they’ve got some office supplies, they’ve got some toys, they’ve got some first aid products, and some food. It’s kind of like a Walgreens without the pharmacy and without the variability in pricing. It’s the 99 Cent Store after all!

Apparently the 99 Cent Store faced the same issue that all retailers do when inflation goes sky high. The only difference is, their name forces them into a somewhat fixed price structure. Either they raise their prices and have to explain it somehow in light of them being the “former” 99 Cent Store, or they figure out a way to make their goods cheaper. This could be through lowering quantities in packaging or by selling lesser quality goods – a difficult thing to do when the cost is 99 cents to begin with.

What’s Going To Happen To The 99 Cent Store Now?

The 99 Cent Store is filing for chapter 11 bankruptcy.

Does that mean it is completely going out of business?

Not necessarily. Chapter 11 bankruptcy is not like the typical, personal bankruptcy with which you may be familiar. Chapter 11 involves the reorganization of a business. Often it involves the sale or closure of underperforming locations. Assets are sold to pay off creditors, and agreements are made with the bankruptcy court as an intermediator to settle debts with creditors at a fraction of what was originally owed.

The end  result of such a process is that the business survives, albeit in a leaner version of its former self. Many well-known businesses have gone through such a process and have gone on to have success post bankruptcy.

A key to a business coming out of the other side of Chapter 11 alive and kicking, is that it has enough assets to use towards paying off at least some of its debt. If a business has so much debt when compared to its assets that it just doesn’t make sense to try and keep the business afloat, then the end goal of the chapter 11 bankruptcy might end up becoming the complete end of the entire business.

Unfortunately for the fans of the 99 Cent Store out there, this looks to be the case. It was reported that it plans to close all of its stores and liquidate its assets completely. That’s not the kind of talk that companies engage in when they survive chapter 11. So if you love your 99 Cent Store, you better shine up those pennies and head on over before it closes for good.

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