Private label lifts Smart & Final in Q4
Smart & Final Stores leveraged the rising popularity of private label products into impressive growth in the fourth quarter.
The retailer posted a 3.2% same store sales increase for the fourth quarter ended Dec. 31, the company’s third conservative quarterly increase.
"We have a differentiated position in the evolving retail marketplace and our unique store operating model enables us to maintain our position as a low-cost leader serving multiple sales channels," said David Hirz, president and chief executive officer. "We are pleased with our strengthening comparable store sales trends, which represent the third consecutive quarter of comp growth. This reflects the success of our merchandising initiatives aimed at both household and business customers with an emphasis on our natural and organic, private label and club-size items. These initiatives, combined with our efforts in strategic sourcing and pricing, contributed to a gross margin rate expansion in the fourth quarter, despite ongoing promotional activity within the grocery landscape."
Smart & Final Stores had overall revenue growth of 6.7% to $1.07 billion. During the quarter the company took a $180 million goodwill impairment charge, equivalent to nearly half of the company's market cap, giving it a net loss of a $146.6 million. Adjusted for the goodwill impairment and other one-time charges, Smart & Final Stores posted earnings per share of $0.15, up from $0.07 a year ago.
For the year ahead, Smart & Final Stores projected same store sales growth of 1%-2% and overall revenue growth of 4%-5%.
Along with its fiscal performance, Smart & Final reported several significant accomplishments during Q4 and 2017, noting that:
- On the e-commerce side, the end of Q4 saw more than 85% of Smart & Final banner stores offering a delivery or click-and-collect option. Sales through these channels collectively represents a small piece of total sales, but continue to grow steadily. “While our research has shown that historically, a large percentage of our online sales are from incremental customers, we expect that this will shift over time to include more existing customers,” Hirz noted.
- In its private label program, the company added 100-plus SKUs in 2017, with a strong focus on its natural and organic brand Sun Harvest, which grew sales by almost 30 percent. It also launched a redesign of its flagship First Street brand, with new packaging and signage to emphasize quality and value. As part of the project, the retailer is consolidating some of its ancillary labels under the First Street brand.
- With its business customers, Q4 sales were strong, up 6.5% year-over-year with an average ticket approximately twice that of a typical household customer.
- For new stores and remodels, Smart & Final opened seven new Smart & Final Extra stores and completed three expansions of its legacy stores to the Extra format in Q4, as well as relocating one store.
Smart & Final Stores, Inc. operates 323 grocery and foodservice stores under the "Smart & Final, " "Smart & Final Extra! " and "Cash & Carry Smart Foodservice" banners in California, Oregon, Washington, Arizona, Nevada, Idaho, Montana and Utah, with an additional 15 stores in Northwestern Mexico operated through a joint venture.