LOS ANGELES -- Smart & Final here believes more consistent operating results will create momentum that will enable it to increase its credibility within the investment community and boost its stock price, the company told shareholders at its annual meeting here.
In response to a shareholder's comment that the company's stock seems to be stuck in the $11-per-share range, Etienne Snollaerts, president and chief executive officer, said, "What we're trying to do is get Smart & Final back to basics in terms of being very consistent with customers, but that takes time, certainly more than one or two years. The stock rises when we've had consistent results for many years that enables you to regain the confidence of the market.
"We plan to increase our store base by 15 units a year on average [as compared with four to five a year for the past several years] because you cannot generate earnings if you don't grow faster than we did in the past, so we're accelerating store growth to create momentum to accelerate future earnings."
Ross Roeder, Smart & Final chairman, said he believes the company's stock is undervalued "because this company is situated in an incredible niche [as a non-membership warehouse store], and the plans we have in place should enable the stock price to eventually catch up with our performance, which has been better than that of most companies in the grocery industry.
"The strike [in late 2003 and early 2004 in Southern California] gave us a big sales increase, and with comparable-store sales up 9% over a two-year period, we're holding onto some of those gains better than other local operators, and the stock price will improve over time to reflect that."
In his formal remarks, Snollaerts said 2004 was a transition year as the company divested its food-service businesses and became a retail-only company, "but this year feels very different. We're mindful of the lessons of the past but clearly looking forward."
He said his optimism stems from the company's positioning in the value retail sector with two formats: 188 Smart & Final stores in California, Arizona, Nevada and northwest Mexico, a format geared to both business and household customers that advertises itself as "the smaller, faster warehouse store"; and 49 Cash & Carry stores in Washington, Oregon, Idaho and Northern California geared to institutional business customers.
The company opened its first Cash & Carry in Southern California in mid-March, Snollaerts told the meeting -- a 20,000-square-foot store in Van Nuys, in the San Fernando Valley. He said he believes the two formats can co-exist.
The Southern California store is the first in the chain to carry the words "Smart Foodservice" beneath the Cash & Carry banner -- to identify it to institutional customers as an outlet for their needs and to link it to the Smart & Final format with which they are already familiar, Rick Phegley, senior vice president and chief financial officer, told SN following the meeting. He said the company plans to open two more Cash & Carry locations in Southern California later this year.
As approved at last year's annual meeting, the company reduced the size of its board from 11 directors to eight with the retirement of five directors and the election of two new members. The company said the reduction was necessary to increase the efficient operation of the board and to reduce costs by reducing the fees and expenses paid to board members.
The two new directors -- both from Casino Guichard-Perrachon, the France-based company that owns 57.1% of Smart & Final's stock -- are Pascal Announ, director of finance, and Thierry Bourgeron, executive vice president, human resources.
Retiring from the board were James Gold, managing director, Lazard Freres & Co.; Thomas Plaskett, managing chairman, Fox Run Capital Associates; and three Casino executives (Pierre Bouchut, CEO; Christian Couvreux, vice chairman; and Jean-Brice Hernu, executive vice president, European supermarkets).
