Smart & Final Stores late Wednesday said that cannibalization from new stores and deflating prices continue to put sales, comps and earnings under pressure during its fiscal third quarter.
The results prompted the Commerce, Calif.-based operator of value-oriented Smart & Final and Cash & Carry stores to adjust its annual guidance for the second time since July, saying that sales growth and earnings per share will come in at a lower range than previously expected.
"In the third fiscal quarter, the effects of deflation and anticipated cannibalization continued to pressure comparable store sales growth and earnings, despite overall growth in customer visits,” David Hirz, president and CEO, said in a statement. “We are pleased that our merchandising and marketing initiatives are driving broader exposure to Smart & Final's unique brands, products and service. We will continue to focus on developing product categories with strong potential sales growth and a robust marketing program and digital campaign to support store performance during the upcoming holiday season.”
For the 16-week period, which ended Oct. 9, Smart & Final earned $7 million, or 9 cents per share, on sales of $1.4 billion. Sales increased by 11.9% from the same period last year driven entirely by new store growth. Comparable-store sales fell by 1.3% in the quarter.
Smart & Final reopened 33 former Haggen stores under its perishable-focused Smart & Final Extra banner in May. The denser store placement of these units is cannibalizing overall sales but drawing more traffic as expected but the company has been especially vulnerable to deflation in categories like beef and dairy in which it overindexes versus traditional grocers, analysts noted.
