99 Cents Only Stores® Reports Earnings Per Share of $.12 for the Fourth Quarter Ended December 31, 2004, and $.39 for 2004

Business Wire, June 30, 2005

CITY OF COMMERCE, Calif. -- 99 Cents Only Stores(R) (NYSE:NDN) reports unaudited fourth quarter 2004 diluted earnings per share of $0.12 on net income of $8.7 million compared to fourth quarter unaudited 2003 restated diluted earnings per share of $0.21 on net income of $15.3 million. Diluted earnings per share for the year 2004 was $0.39 on net income of $27.8 million compared to 2003 restated diluted earnings per share of $0.81 on net income of $58.7 million.

As the Company has previously announced, in response to views expressed by the Chief Accountant of the Securities and Exchange Commission ("SEC") in a February 7, 2005 letter to the American Institute of Certified Public Accountants, the Company will be restating its financial statements for 2002, 2003, and the first three quarters of 2004 for its accounting for operating lease rent holidays and for leasehold improvements funded by landlord incentives or allowances under operating leases (tenant improvement allowances). In addition, as previously reported, the Company has completed its analysis of useful lives used to depreciate certain building and leasehold improvements, and has determined that a restatement of these prior period financial statements is required to reflect adjustments to these useful lives to periods longer than initially assigned in order to properly reflect the economic lives of these assets. This adjustment to the useful lives will result in a restatement of accumulated depreciation and depreciation expense for 2002, 2003 and the first three quarters of 2004.

The net impact, after-tax, of these restatements will be to increase previously reported net income in 2002 and 2003 by $1.8 million and $2.2 million, respectively, and to increase previously reported net income for the first three quarters of 2004 by $0.9 million, $0.9 million and $0.8 million, respectively. The net effect of these restatements will be to increase previously reported net income for the nine months ended September 30, 2004 by $2.6 million and increase diluted earnings per share by $0.04.

Eric Schiffer, CEO of the Company, said, "We are pleased to get these restatement issues, which resulted in an increase to earnings for all prior periods, behind us. However, earnings per share for the fourth quarter of 2004 was negatively impacted by several factors, including a $10.1 million addition to our California workers' compensation reserve due to an actuarial adjustment, and the continued lower than expected sales volume in our Texas stores. In the second quarter of 2005, we took what we believe are significant steps intended to help control our California workers' compensation costs, including hiring an experienced Director of Risk Management and switching third party workers' compensation claims administrators. In 2004, all stores, excluding Texas, open for a full year averaged sales of $4.8 million per store, while Texas stores averaged $2.2 million. Average sales per sellable square foot for all stores, excluding Texas, averaged $293 while Texas averaged $101. One of our highest 2005 priorities is improving the performance of our Texas stores."

Retail sales for the fourth quarter of 2004 were $255.1 million, an increase of $19.1 million, or 8.1%, from the fourth quarter of 2003. Total 2004 fourth quarter sales including wholesale sales were $265.9 million, an increase of $18.4 million, or 7.5%, from the fourth quarter of 2003. The increase in retail sales is primarily due to the increase in the number of stores.

The fourth quarter 2004 total gross margin was 41.0%, compared to 40.7% for the fourth quarter of 2003. Retail gross margin for the fourth quarter of 2004 was 41.9%, compared to 41.7% for the fourth quarter of 2003.

Operating expenses, including depreciation, for the fourth quarter of 2004 were $98.9 million, an increase of $22.0 million, or 28.6%, from the fourth quarter of 2003. The increase is primarily due to higher store operating costs (mainly labor and occupancy) as a result of the increase in the number of stores, an increase of $4.8 million in California self-insured workers' compensation expense, an increase in distribution and transportation costs of $2.6 million, and increased external auditor and professional fees, including Sarbanes-Oxley compliance efforts, of $1.0 million.

Net income in the fourth quarter of 2004 was $8.7 million, a decrease of $6.7 million, or 43.5%, compared to the fourth quarter of 2003. The decrease is due primarily to operating expenses, including those discussed above, increasing proportionately more than revenues.

Retail sales for 2004 were $929.9 million, an increase of $113.5, or 13.9%, from 2003. Total 2004 sales including wholesale were $972.2 million, an increase of $109.7, or 12.7%, from 2003. For all 99 Cents Only Stores, including Texas stores, open all of 2004, the average net sales per sellable square foot was $270 and the average net sales per store was $4.6 million.

Retail gross margin for 2004 was 39.9% compared to 41.2% in 2003. The total 2004 gross margin was 39.0% compared to 40.1% in 2003. The retail gross margin declined primarily due to an increase in average product cost resulting from a shift in product mix, and an increase in shrinkage/spoilage as a result of the Company's expanded offerings of fresh produce.