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    Smart & Final Q2 Net Sales Up 15%; Comps Dip 0.3%

    Deflation, cannibalization usher in headwinds

    In tandem with a 15 percent net sales gain of $1,038 million during its second fiscal quarter ended June 19, following the integration of 33 acquired Haggen stores, Smart & Final's same-store sales took a 0.3 percent hit due to deflation and cannibalization.

    During the Q2 measuring period, the Commerce, Calif.-based retailer's net income rang up $7.8 million, or 10 cents per diluted share, alongside adjusted net income of $15.5 million, or 20 cents per diluted share and an adjusted EBITDA of $50.7 million.

    "The anticipated sales cannibalization from new store development, coupled with higher-than-expected deflationary pressures on product pricing, have resulted in headwinds to comparable-store sales during the first half of 2016," said Smart & Final President/CEO David Hirz, adding that the regional retailer expects the challenging climate to remain intact during the balance of the year. "Short-term pressures aside, we are confident in our longer-term store development plans and driving customer engagement through our merchandising and marketing initiatives."

    Net sales of $1,038 million represented a 15 percent increase from the $905 million reported in the same period of 2015. The company said its net sales growth was driven by the contribution of new stores, although partially offset by a 0.3 percent decrease in comparable-store sales. Q2 Comp sales saw a 0.4 percent increase in comparable transaction count, including the effect of anticipated cannibalization from new stores, and a 0.7 percent decrease in comparable average transaction size, including the impact of deflation in key product categories in both the Smart & Final and Smart & Final Extra! store banners.

    Net sales for Smart & Final banner stores were $812 million, an 18 percent gain from the prior year period, while the banner's same-store sales slipped 0.6 percent in Q2.

    "Smart & Final has generated dynamic growth in new stores and overall sales in the first half of 2016," noted Hirz. "We've successfully completed the integration of 33 acquired store properties, which have all opened as Smart & Final Extra! stores. These new stores are performing well, contributing to strong growth in customer transactions, and have led to the expansion of our workforce by over 3,500 new employees.  Additionally, we are broadening our reach to both household and small-business customers through an ongoing brand-messaging program.  We look forward to the longer-term benefits of increased market density as we communicate Smart & Final's unique platform to new and existing customers."

    During the quarter, the company opened 16 new Smart & Final Extra! stores and completed two relocations of legacy Smart & Final stores to the Smart & Final Extra! format. All told, the company operates 306 stores, including 161 Smart & Final Extra! stores, 90 legacy Smart & Final stores and 55 Cash & Carry locations.

    The company's full Q2 results can be found here.

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