Retail discounter 99 Cents Only Stores is seeking Chapter 11 bankruptcy protection and begun marketing leases for the hundreds of stores it's closing as it winds down its business and a potential buyer emerges for some of its Southern California locations.

Number Holdings, the direct parent company of Commerce, California-based 99 Cents Only, on Monday said it had filed voluntary petitions for relief in the U.S. Bankruptcy Court for the District of Delaware in order to "implement the previously announced orderly wind-down of its business and pursue a value-maximizing sale of its real estate and other assets."

The retailer last week announced it planned to shutter all 371 of its stores, which span California, Texas, Arizona and Nevada, citing headwinds from the economy, inflation and retail theft — challenges facing other retail chains, as well. All of its locations are currently open and have started going out of business sales, according to 99 Cents Only.

In court documents, 99 Cents Only said by the end of the month it is looking to close about 125 stores and to shutter the remaining 246 by May 31. That decision was made based on "historical and recent store profitability, historical and recent sales trends, occupancy costs, the geographic market in which each store is located, and specific operational circumstances related to each store’s performance," according to the retailer.

"Given the high cost of rent facing the debtors, it was critical that they commence the store closing sales as early in April as possible, in order to maximize the value of the estates," 99 Cents Only said in a filing.

The company said it has secured $60.8 million in senior secured, super-priority debtor-in-possession financing consisting of $35.5 million in new money to be provided by an entity affiliated with several of the company's existing stakeholders, subject to court approval. The retailer's announced closings are among the largest number of store shutterings planned so far this year and encompass nearly 10 million square feet of retail space.

However, 99 Cents Only doesn't mark the first retail bankruptcy this year. Last month Joann, the leading U.S. seller of sewing supplies, sought Chapter 11 protection but said it plans to keep its 815 stores open. By contrast, beauty chain The Body Shop recently filed for Chapter 7 liquidation in the United States and closed 51 stores.

In terms of its store fleet, 99 Cents Only owns 44 of its stores and leases another 333 locations, according to the company. The discounter occupies about 9.6 million square feet of retail space, according to CoStar data.

"Even being on the East Coast, I think everyone in the real estate business knew of 99 Cents Only Stores," Bill Read, an executive vice president at Retail Specialists, said in an email to CoStar News. "They were sort of legendary in reputation for attacking large crowds and creating heavy customer traffic. Its tough for any retailer to last forever and I have been hearing of their trouble for years."

After 99 Cents Only announced it was liquidating, Mark Miller — the former president of Big Lots and current CEO of the California-based Pic 'N' Save chain — said he was part of an investor group that wanted to buy some of the discounter's stores. That group has its sights on 143 of 99 Cents Only's brick-and-mortar locations in five counties in Southern California, Miller told CoStar News on Monday.

"We're still interested. ... I want a really tight, really well-run chain," Miller said of the 99 Cents Only locations he's pursuing and would keep operating.

In court documents, the retailer said it has thousands of contracts, with vendors for goods and for store leases. The company is in the process of evaluating those contracts to determine if they should be rejected or assumed and assigned to third parties.

"This analysis is well underway, and a process has been commenced to market the debtors’ non-residential real property leases as well as some of their other assets," 99 Cents Only said in a court filing.

Coresight Research issued its tracking report on U.S. store closings in March, which doesn't include 99 Cents Only, on Monday. They are pacing ahead of last year, according to Coresight.

"The 1,751 year-to-date announced store closures as of March 29 will result in an estimated 30.1 million square feet of closed retail space," Coresight said. "The 2024 closure count compares to 1,664 announced closures in the comparable period of 2023."

Dollar Tree and its Family Dollar chains account for a big chunk of this year's closing. Dollar Tree plans to close about 1,000 Family Dollar stores in the next few years. In its report, Coresight estimated that 620 of those closures will take place this year, accounting for 6.2 million square feet of retail space.

Miller said he doesn't believe that inflation is what's plaguing the dollar stores, but rather poor management and getting too big with too many stores, losing focus on customers and local markets.

Milbank is serving as legal adviser to 99 Cents Only, Jefferies is its investment bank and Alvarez & Marsal is serving as restructuring adviser. Hilco Global is assisting the company with its previously announced liquidation event, and Jefferies and Hilco are managing the sale of its real estate assets, both owned and leased.