99 Cent Stuff, Inc. Reports Improved Second Quarter Financial Results.

BOCA RATON, Fla. -- 99 Cent Stuff, Inc. (OTCBB:NNCT), a single-priced value discount retailer that provides a wide variety of quality merchandise that can be purchased for 99 cents, announced today its financial results for the three months ended June 30, 2004.

Second quarter net sales increased by $1.3 million, or 13.5% to $10.9 million, from $9.6 million in 2003. Same-store net sales increased $0.8 million, or 8.5%.

Gross profit increased $0.5 million, or 19.8%, to $3.1 million in 2004 from $2.6 million in 2003. As a percentage of net sales, gross profit margin increased to 28.4% in 2004 from 26.9% in 2003. The increase in margin was due primarily to a change in product mix, cost variations primarily in food products, and reduced shrinkage. This was partially offset by increased sales of produce, which carries lower margins.

"The company's financial metrics are improving," said Raymond Zimmerman, chairman & chief executive officer of the 13-store chain. "Our focus on improving operations, merchandising and purchasing is paying off."

Selling, general and administrative expenses (SG&A) increased $0.5 million, or 16.3% in the quarter. As a percentage of net sales, SG&A increased to 34.8% in 2004 from 34.4% in 2003. Approximately 40% of the SG&A increases can be directly attributed to $0.2 million in one-time new store opening expenses. 99 Cent Stuff planned to open three new stores during the April-June period, however permitting issues and construction delays slowed the process causing this additional expense. Jensen Beach opened the last week of June, Pembroke Pines opened on July 13 and Kendall is slated to open in September. On average, 99 Cent Stuff stores open at least a year report sales in excess of $4 million per store.

"The cost of opening and ramping up these stores impacted results in the short-term, but we expect them to make a significant contribution to the company's results in the third and fourth quarters - and for years to come," Zimmerman added.

Operating loss for the quarter was $0.7 million in both 2004 and 2003, but improved as a percentage of net sales by 0.7 percentage-points from 7.1% in 2003 to 6.4% in 2004. Net loss for the quarter decreased $0.3 million or 26.4% to $0.8 million in 2004 from $1.1 million in 2003.

Interest expense was reduced by $0.3 million or 75% to $0.1 million during the quarter from $0.4 million in 2003. This can be attributed to decreased borrowings and lower interest rates.

As a result of the items discussed above, net loss decreased $0.3 million, or 26.4%, to $0.8 million in 2004 from $1.1 million in 2003. Absent one-time pre-opening store expenses of $0.2 million included in selling, general and administrative, net loss would have been $0.6 million in 2004, or a 42.1% increase over 2003.

6-MONTH RESULTS

Net sales for the six months ended June 30, 2004 increased $2.5 million, or 12.8%, to $21.7 million, up from $19.2 million in 2003. Same-store net sales, for stores open for the entire first half, increased $1.5 million, or 7.9%, compared to the prior year. The increase in net sales was primarily due to increased levels of inventory, providing more goods for sale and increased volume in produce.

"During the first half, approximately 27.6% of our sales were in produce, which has a very high turnover rate versus our other items, but we anticipate that produce will decrease as a percentage of net sales due to the implementation of the company's direct import program," Zimmerman said. "Containers are just beginning to arrive at the stores. This will significantly increase sales of higher-margin toys, housewares and giftware. Other import program benefits include offering a more consistent presentation, better quality goods and superior profit margins."

Gross profit for the first half increased $1.0 million, or 18.8%, to $6.1 million in 2004 from $5.1 million in 2003. Gross profit percentage increased to 28.1% in 2004 from 26.7% in 2003 and was primarily attributable to a change in the product mix, cost variations, primarily in food products, and reduced shrinkage, partially offset by increased sales in produce, which generally has lower margins.

First half SG&A increased $0.8 million, or 12.0%, to $7.4 million in 2004 from $6.6 million in 2003. Twenty-five percent of the increase is attributable to one-time new-store expenses of $0.2 million.

Operating loss decreased $0.2 million, or 12 per, to $1.3 million for the six months ended June 2004 from $1.5 million in 2003. As a percentage of net sales, operating loss decreased 1.6 percentage-points to 5.9%, down from 7.5%, in 2003. This equates to a 21% improvement over the prior year.

Interest expense decreased $0.5 million, or 67.8%, to $0.2 million in first half of 2004 from $0.7 million in 2003. The decrease is primarily attributable to decreased borrowings and lower interest rates. As a percentage of net sales, interest expense decreased 2.9 percentage-points, to 1.1% in 2004 from 4.0% in 2003.

Net loss decreased $0.7 million, or 31.7%, to $1.5 million in first half of 2004 from $2.2 million in 2003. Absent one-time pre-opening store expenses of $0.2 million included in selling, general and administrative, first half net loss would have been $1.3 million, or a 39.4% improvement, as compared to 2003.

About 99 Cent Stuff:

Founded in 1999, 99 Cent Stuff, Inc. (http://www.99centstuff.com) is a Florida-based single-priced value discount retailer of primarily name brand, consumable merchandise that operates 13 retail stores in South Florida. The stores offer a wide assortment of regularly available consumer goods as well as a broad variety of quality, closeout merchandise. Every product is sold at 99 cents, including extra value savings of two or three items sold together for 99 cents. The stores feature consumer staples such as produce and bread to encourage customers to visit the stores frequently.

Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from what is expressed or implied by such forward-looking statements. The Company's future operating results are dependent upon many factors, including but not limited to: (a) those risks and uncertainties related to general economic conditions in the U.S., including regulatory factors that may affect such economic conditions and (b) whether we are able to manage our planned growth efficiently and operate profitable operations, including whether our management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage existing and potential market opportunities. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements contained in this press release, whether as a result of new information, future events, or otherwise.