99 Cents Only adds exec, reports Q2 results

NEW YORK — In another indication of its growth aspirations, 99 Cents Only named a former high ranking Kroger executive president and CEO. The hiring comes just months after the retailer tapped former Walmart executives to fill the head merchant and CFO roles at the 389-store retailer.



Former Kroger and Procter & Gamble executive Geoffrey Covert, 64, was named president and CEO at 99 Cents Only on Sept. 11, filling a position that had been held on an interim basis the past four months by board chairman Andrew Giancamilli.    



The day prior to 99 Cent’s Only announcement, Kroger announced a series of personnel moves including the departure of Covert who was stepping down from his role as senior VP of retail operations after 20 years with the company.



Covert had spent 22 years at Procter & Gamble prior to joining Kroger in 1996. Covert said he was excited to be joining a growing and transforming business.





“I was attracted to 99 Cents Only Stores' strong fundamental business strategy, longstanding brand loyalty among customers, and its long-term growth potential in the extreme value sector," Covert said.





His prior responsibilities along with the addition of other retail executives with considerable experience at significantly larger companies suggest 99 Cents Only is eyeing growth opportunities beyond its West Coast stronghold. For example, at Kroger, Covert was responsible for nine operating divisions as well as new market expansion.



In addition, 99 Cents Only a few months earlier named two former top Walmart executives to key roles. Former Walmart executive VP of merchandising Jack Sinclair was named 99 Cents Only’s chief merchandising officer in July, and the prior month former Walmart U.S. division CFO Michael Fung was named CFO.





Covert, Sinclair and Fung join 99 Cents Only as the company looks to improve on a deteriorating financial performance. Covert’s appointment as CEO was made in conjunction with the release of second quarter results that highlight ongoing difficulties at a retail long viewed as having a distinct value proposition.





Sales in the second quarter increased by $30 million to $488.5 million, but same-store sales declined 1.9% and customer traffic was reduced during the period ended July 31.



Heightened levels of promotional activity caused a 440 basis point decline in gross margin while a range of increased costs, including executive compensation, store payroll and professional fees, caused a 340 basis point increase in selling, general and administrative expenses.




As a result, the company posted a net loss of $78.1 million versus a paltry prior year profit of $2 million. Even on an adjusted basis the company’s $6.9 million profit was less than the prior year’s $36.3 million.