99 Cents Only Stores Accounts for Merchandise Inventories with SAP

99 Cents Only Stores is making significant investments in technology, upgrading its accounting processes and procedure related to inventory. The retailer is undertaking an SAP implementation that will enable it to have real-time tracking of inventory at each retail store on a perpetual basis by SKU. The multi-year effort will convert purchasing, inventory and accounting systems, enhancing management and tracking of store inventory and will enable improved productivity and profitability moving forward.
The retailer is upgrading its systems, processes, and procedures related to accounting for merchandise inventories. "Our new IT system, built on SAP, will allow for the first time tracking of inventory at each retail store on a perpetual basis by SKU," said Frank Schools, SVP and CFO for 99 Cents Only Stores on a recent call with analysts. "We believe that the new system will allow for improved productivity and profitability going forward. The implementation process is underway with all stores expected to be completed by the end of fiscal-year 2015. Management expects to change its accounting for inventory to a more accurate methodology concurrent with the full SAP system implementation."
To prepare for SKU level perpetual inventory, 99 Cents Only Stores performed physical counts and established inventory at retail and cost by SKU at 81 of its more than 300 stores. This helped to determine the value of store level inventory for each price point category, and converting the total of those retail values to an estimated cost by applying a single average cost percentage by store.
Another change the retailer made was the revision of its purchasing and merchandising philosophy to buy inventory of a nature and in quantities that could be sold within 12 months, and to liquidate inventories more quickly so that the stores have more current product than in prior periods.
Current management will monitor its aged inventory in the future and take appropriate and timely actions, including in-store markdowns, sales through our Bargain Wholesale Division and partnerships with liquidators. This is another example of the improved processes that will benefit the retailer in the long term.
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