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smartfinalSmart & Final Stores, Inc. reported financial results for the fiscal second quarter ended June 14, 2015.

Second Quarter Highlights:

* Net sales increased 9.3% to $905.1 million

* Comparable store sales growth of 3.5%

* Net income of $11.0 million, or $0.14 per diluted share

* Adjusted net income increased 14.2% to $16.9 million, or $0.22 per diluted share

* Adjusted EBITDA increased 6.7% to $50.7 million

* 263 stores at quarter-end, including 111 Smart & Final Extra! stores

“Smart & Final Stores had strong total sales growth of over 9% in the second quarter, led by solid growth in comparable store sales and the contribution from new stores,” said Dave Hirz, President and Chief Executive Officer.  “While our average transaction size was impacted by deflation in a few product categories during the second quarter, gross margin rates remained strong and comparable transaction counts grew in both ourSmart & Final and Cash & Carry store banners.  We continued our robust store growth with 13 Extra! format stores opened through the second quarter of 2015.”

Mr. Hirz continued, “As we expand, we have maintained a consistent focus on value – convenience – and quality – themes that continue to resonate with both our household and business customers.  We are on track to deliver our planned store growth for 2015 and advance our exciting merchandising and branding initiatives in the Smart & Final banner, and continue new store growth in the Cash & Carry banner.”

In order to aid understanding of the Company’s business performance, it has presented results in conformity with accounting principles generally accepted in the United States (“GAAP”) and has also presented adjusted net income, adjusted net income per share, adjusted net income per diluted share, EBITDA and adjusted EBITDA, which are non-GAAP measures that are explained and reconciled to the comparable GAAP measures in the tables included in this release. Where applicable, the numbers below are first presented on a GAAP basis and then on an adjusted basis.

Second Quarter Fiscal 2015 Financial Results
Net sales were $905.1 million, a 9.3% increase as compared to $828.1 million in the same period of 2014. Net sales growth was driven by a 3.5% increase in comparable store sales and from the net sales contribution of new stores. The growth in comparable store sales was comprised of approximately a 4.2% increase in comparable transaction count and a 0.6% decrease in comparable average transaction size.

Net sales for Smart & Final banner stores were $687.4 million, a 10.3% increase as compared to $623.1 millionin the same period of 2014.  Comparable store sales growth for the Smart & Final banner was 3.2% in the second quarter.

Net sales for Cash & Carry banner stores were $217.8 million, a 6.2% increase as compared to $205.0 millionin the same period of 2014.  Comparable store sales growth for the Cash & Carry banner was 4.7% in the second quarter.

Gross margin from operations was $141.6 million, a 10.5% increase as compared to $128.2 million in the same period of 2014. Gross margin rate in the second quarter was 15.6% as compared to 15.5% in the same period of 2014.

Operating and administrative expenses were $114.1 million, a 12.5% increase as compared to $101.5 million in the same period of 2014. This increase was primarily related to higher sales volumes, increased store support costs, additional marketing expense, and public company costs.

Net income was $11.0 million, as compared to $11.1 million in the same period of 2014. Net income per diluted share was $0.14 as compared to $0.19 in the same period of 2014, and reflects an increase of approximately 17.6 million fully diluted shares, including shares issued in the Company’s September 2014 initial public offering.

Adjusted net income was $16.9 million, an increase of 14.2% as compared to $14.8 million for the same period of 2014. Adjusted net income per diluted share was $0.22 as compared to $0.25 in the same period of 2014, and reflects an increase of approximately 17.6 million fully diluted shares, including shares issued in the Company’s September 2014 initial public offering.

Adjusted EBITDA was $50.7 million, an increase of 6.7% as compared to $47.5 million in the same period of 2014.

Fiscal Year-to-date Financial Results
Net sales were $1,727.3 million in the 24 weeks (two fiscal quarters) ended June 14, 2015, an increase of 10.5% as compared to $1,563.1 million in the same period of 2014.  Net sales growth was driven by a 4.8% increase in comparable store sales and from the net sales contribution of new stores.  The growth in comparable store sales was comprised of a 4.2% increase in comparable transaction count and a 0.6% increase in comparable average transaction size.

Net sales for Smart & Final banner stores were $1,316.2 million, an 11.1% increase as compared to $1,185.0 million in the same period of 2014. Year-to-date comparable store sales growth for the Smart & Final banner was 4.0%.

Net sales for Cash & Carry banner stores were $411.1 million, an 8.7% increase as compared to $378.0 millionin the same period of 2014.  Year-to-date comparable store sales growth for the Cash & Carry banner was 7.2%.

Net income was $15.9 million, an increase of 16.9% as compared to $13.6 million in the same period of 2014. Net income per diluted share was $0.21 as compared to $0.23 for the same period of 2014.

Adjusted net income was $24.6 million, an increase of 26.8% as compared to $19.4 million in the same period of 2014. Adjusted net income per diluted share was $0.32 as compared to $0.33 in the same period of 2014.

Adjusted EBITDA was $85.7 million, an increase of 10.3% as compared to $77.7 million in the same period of 2014.

Growth and Development
During the second quarter of fiscal 2015, the Company opened five new Smart & Final Extra! stores and completed four conversions of legacy Smart & Final stores to the Smart & Final Extra! format, including one store relocation. The Company also relocated one Cash & Carry store. As of June 14, 2015, the Company operated a total of 111 Smart & Final Extra! and 99 legacy Smart & Final stores, and 53 Cash & Carry stores.

Operating Stores at Quarter End (June 14, 2015)

 Smart & Final Banner Stores 

  Extra! format 

Legacy format

 Total 

Cash & Carry
Banner Stores

Total Company

End of Fiscal 2014

98

103

201

53

254

  New stores

9

9

9

  Relocations

1

(1)

  Conversions

3

(3)

End of 1st Quarter 2015

111

99

210

53

263

Consistent with prior guidance, during the remainder of fiscal 2015, the Company expects:

  • In the third quarter – to open six new Smart & Final Extra! stores, complete three conversions of legacySmart & Final stores to the Extra! format, including one store relocation, and open one new Cash & Carrystore.
  • In the fourth quarter – to open five additional new Smart & Final Extra! stores, complete two additional conversions of legacy Smart & Final stores to the Extra! format, including one store relocation, and open one new Cash & Carry store.

Leverage and Liquidity
At June 14, 2015, the Company’s debt, net of debt discount, was $589.4 million and cash and cash equivalents was $121.4 million.

During the second quarter of fiscal 2015, the Company amended its Term Loan Facility to reduce the interest rate margin over the base rate by 0.50% and to reduce the base rate by 0.25%.  The November 15, 2019maturity date remained unchanged. The Company expects that the reduced rates will result in lower cash interest costs of $3 to 4 million annually.

In the 24 weeks ended June 14, 2015, the Company generated cash from operations of $71.0 million. The Company invested a net amount of $53.9 million in capital expenditures, primarily related to the development ofExtra! format stores, the relocation of one Cash & Carry store, and to improvements of existing assets.

Outlook
The Company is maintaining its previously issued outlook for the 2015 Fiscal Year (ending January 3, 2016):

Fiscal Year Ended January 3, 2016

Net sales growth

11% – 12%

Comparable store sales growth 

3.5% – 4.5%

Unit growth (net new stores)

20 Smart & Final Extra!

2 Cash & Carry

Relocations of existing stores

3 Smart & Final

1 Cash & Carry

Conversions of legacy stores to the Extra! format

6 stores

Adjusted EBITDA

$185 – $190 million

Adjusted net income

$51 – $53 million  

Adjusted diluted EPS

$0.67- $0.70

Capital expenditures 

$135 – $145 million

Basic weighted average shares

73.1 million

Fully diluted weighted average shares

76.6 million

Second Quarter 2015 Conference Call
The Company will host a conference call today at 1:30 p.m. PT / 4:30 p.m. ET to discuss its fiscal second quarter 2015 financial results. To participate in the call, please dial (877) 407-0784 (U.S.) or (201) 689-8560 (International) ten minutes prior to the start time. The conference call can also be accessed on the “Investors” section of the Company’s web site at http://www.smartandfinal-investor.com/.

For those unable to participate during the live broadcast, a telephonic replay of the call will also be available beginning today at approximately 7:30 p.m. Eastern Time, by dialing (877) 870-5176 (U.S.) or (858) 384-5517 (International) and entering the replay pin number: 13613511.  The telephonic replay will be available until11:59 p.m. Eastern Time, on Wednesday, August 5, 2015.

About Smart & Final
Smart & Final Stores, Inc. (NYSE: SFS), is a value-oriented food and everyday staples retailer that serves household and business customers. The Company is headquartered in Commerce (located in Los Angeles), CA, where it was founded over 140 years ago.  As of June 14, 2015, the Company operated 263 grocery and foodservice stores under the “Smart & Final”, “Smart & Final Extra!” and “Cash & Carry Smart Foodservice” banners in California, Oregon, Washington, Arizona, Nevada, and Idaho, with an additional 15 stores in northern Mexico operated through a joint venture.

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2 Comments

  1. Owned by Ralph’s. Krogers brand in both stores. Now I can use my Ralph’s ccd at both.??

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