Remember the “Ultimate Recession Stock?”

By Travis Johnson, Stock Gumshoe, September 9, 2008

It’s now the “ultimate inflation stock” — I wrote a few months ago about what Ann Sosnowski called her ultimate recession stock in an ad for Safe Haven Investor.

And she has been right to pick this one, at least for this short time period, since the shares went up from about $7 to today’s price of just a bit over $9. It was Ninety Nine Cent Stores (NDN), and it only caught my attention today because one of my earlier comments that they were stuck in a tight inflation vise by keeping their maximum price at 99 cents even as their input costs must be going up dramatically.

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Clearly, they listened to my wise comments (what else could it be?), for today they raised the price.

From 99 cents to 99.99 cents.

Still cheaper than the “dollar stores,” eh? I can’t imagine how effective this 1% price hike will be in the long run, though of course they can change their product mix whenever they want, and reduce package sizes, and just sell junkier stuff, but eventually you run out of products that you can sell for under a dollar. Especially when that dollar keeps deflating — the price has moved up from 99 cents to 99.99 cents, but in the past year inflation alone would have driven it up to about $1.04.

I don’t know how much longer they can keep this up — the five and dime stores are gone, a candy bar costs a dollar, and we are going, eventually, to get to the point where people don’t bother to pick up a dollar on the sidewalk. Have they dug themselves such a tight little business model that they won’t be able to keep up with the times?

I’m impressed that they’ve continued to do reasonably well over 26 years of sometimes very high inflation — and their prices are remarkable, and they do have the advantage of probably higher sales with the increasing cost sensitivity of consumers, especially in their home areas in California. But doesn’t there have to be an end somewhere?

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