99 Cents Only Stores Q3 2016 net sales increased 2.8%Staff writer ▼ | December 15, 2015
99 Cents Only Stores reported third quarter fiscal 2016 results. Net sales increased 2.8% to $491.5 million, compared to $478.3 million in Q3 2015.
99 Cents Only Stores Gross margin was 26.8%
Same store sales decline was primarily driven by challenges in produce and consumables sales, cannibalization impact of recent new store openings as well as ongoing initiatives to clear excess seasonal inventory.
Gross margin, as a percentage of net sales, was 26.8% in the third quarter of fiscal 2016, a decline of 460 basis points from the third quarter of fiscal 2015.
Gross margin was negatively impacted by an increase in cost of goods sold, partially as a result of the Company's ongoing initiatives to clear excess seasonal inventory, higher shrink & scrap as well as higher distribution costs.
Selling, general and administrative expenses were $147.1 million, or 29.9% as a percentage of net sales, an increase of 60 basis points from the third quarter of fiscal 2015.
The increase in selling, general and administrative expenses as a percentage of net sales was primarily driven by store level payroll and occupancy expenses, outside professional fees, depreciation and amortization and executive-related expenses, offset by a one-time impact of a $5.5 million gain on sale of excess warehousing capacity, which benefitted SG&A by approximately 110 basis points.
During the third quarter of fiscal 2016, the Company recorded a $120.0 million non-cash goodwill impairment charge relating to the retail reporting unit. The impairment determination was based primarily on significant declines in profitability in recent quarters and only a modest recovery to restore expected future operating results to historical levels, as well as a significant increase in the fair value of the Company's tangible assets since the Merger.
This is a preliminary estimate of the non-cash impairment charge and adjustments to the estimate may be recorded in the fourth quarter of fiscal 2016 as the Company finalizes the impairment review. The goodwill impairment charge did not adversely affect the Company's debt position, cash flow, liquidity or compliance with financial covenants.
Net loss was $152.6 million in the third quarter of fiscal 2016 compared to $3.8 million for the third quarter of fiscal 2015. Net loss as a percentage of net sales was (31.1)% for the third quarter of fiscal 2016, compared to (0.8)% for the third quarter of fiscal 2015.
Adjusted EBITDA was $5.1 million in the third quarter of fiscal 2016, compared to $27.1 million in the third quarter of fiscal 2015. Adjusted EBITDA margin was 1.0% compared to 5.7% over the same period. ■