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LOS ANGELES -- Non-membership warehouse retailer Smart & Final's aggressive store growth plans fueled its 4.5 percent growth for Q1 sales.
Sales for the 12-week first quarter ended March 26, 2006 were $446.8 million, an increase of $19.2 million over last year. Income from continuing operations was $2.5 million for the first quarter of 2006, or 8 cents per diluted share, compared with $3.5 million, or 11 cents per share last year. Comparable-store sales growth for the first quarter was 1.8 percent, unadjusted for cannibalization of existing store sales by new stores.
"Our 2006 first-quarter sales reflect the continuation of our strong store-growth plan and the near-term impact of adding new stores on earnings per share," said Etienne Snollaerts, president and c.e.o. "Our total sales growth of over 4 percent from the prior-year first quarter indicates that we have a solid process for selecting new store locations. As these new stores come on line and begin to build sales, we also are experiencing an expected increase in our cost structure, which accounted for the decrease in earnings per share from the prior-year first quarter."
Snollaerts added: "Our 15 new stores in 2005 were opened disproportionately toward the latter part of the year, and their costs are now included in our 2006 first quarter, which traditionally is our lowest sales quarter during the year. As sales from these stores continue to grow, their impact on the overall cost structure will moderate. We're also proceeding with our store development program, and we anticipate another year of strong growth in 2006."
Gross margin from continuing operations increased $2.6 million, or 3.9 percent, to $70.8 million for the first quarter of 2006, compared with last year's $68.2 million. As a percentage of sales, gross margin was 15.9 percent for the first quarter of both 2006 and 2005. Although the aggregate year-to-year gross margin rate didn’t change, the company realized improved gross profit rates on sales for the first quarter of 2006, which was offset by increased distribution costs and the impact of new stores.
As a percentage of sales, operating and administrative expenses increased to 14.5 percent for the quarter, compared with 14.1 percent last year. Operating and administrative expenses from continuing operations increased $4.5 million, or 7.5 percent, to $64.7 million for the quarter, compared with $60.2 million last year. The increase in dollars and as a percentage of sales was largely attributable to increased store-operating costs and information system costs, partially offset by lower incentive compensation costs.
Smart & Final opened one store during the quarter, in Seattle, bringing its total store count to 250. The retailer had 237 stores this time last year.
On April 2 Smart & Final announced that its board of directors expected to engage a financial adviser to assist the company in studying potential strategic alternatives. This action was taken in light of an earlier announcement by the company's majority shareholder, Casino Guichard-Perrachon S.A., that it's studying the potential sale, by the end of 2007, of certain noncore assets. Smart & Final has engaged Goldman Sachs & Co. to act as a financial adviser to the company. There can be no assurance as to the timing of this process or that any specific transaction will result, the company mentioned in its April 2 statement on the matter.
Founded in 1871 in downtown Los Angeles, Smart & Final Inc. currently operates 250 non-membership warehouse stores for food and foodservice supplies in California, Oregon, Washington, Arizona, Nevada, Idaho, and northern Mexico.