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SMART & FINAL TAPS GOLDMAN AS ADVISER

LOS ANGELES - Smart & Final here said it has hired Goldman Sachs as a financial adviser to help the company understand the alternatives "that may bring enhanced value to all shareholders, including Groupe Casino," Ross E. Roeder, chairman, told analysts.Casino Guichard-Perrachon, the Paris-based majority owner of Smart & Final stock, disclosed in mid-March it was contemplating the sale of its non-core

LOS ANGELES - Smart & Final here said it has hired Goldman Sachs as a financial adviser to help the company understand the alternatives "that may bring enhanced value to all shareholders, including Groupe Casino," Ross E. Roeder, chairman, told analysts.

Casino Guichard-Perrachon, the Paris-based majority owner of Smart & Final stock, disclosed in mid-March it was contemplating the sale of its non-core assets by the end of 2007 to reduce debt levels.

"Groupe Casino did not identify any specific assets, and we know their plan may or may not ultimately include the sale of its [57%] stake in Smart & Final, so we start with some uncertainty about the future," Roeder told investors during a conference call. "And the board has responded, with the full cooperation and support of Groupe Casino, by beginning its own process of exploring strategic alternatives. However, because we are just in the early stages of this evaluation, we don't intend to speculate about potential outcomes before they have been studied."

Rick Phegley, senior vice president and chief financial officer, said Casino will be a part of Smart & Final's evaluation process "through its board membership."

For the 12-week first quarter ended March 26, Smart & Final reported an earnings decline of 21.4% to $2.5 million, while sales rose 4.5% to $446.8 million and comparable-store sales increased 1.8%.

Phegley said the drop in earnings was due to the late completion of most of the 15 new stores it opened during the 2005 fiscal year.

Smart & Final opened six new stores in 2002, three in 2003 and five in 2004, "so the financial effect of our store opening program has been fairly stable," Phegley noted. "But last year we opened 15 new stores, and because of challenges in product distribution in the middle to latter part of the year, we chose to delay many of those openings to later in the year.

"As a result, we had 13 new stores operating in the first quarter this year - more than we had in the prior year - and because those stores are just beginning to build sales in the slowest quarter of the year, the effect on the income statement was likely greater than if they had opened more evenly throughout 2005."

He said the company is pleased with the overall performance of the new stores as well as the base business.

Etienne Snollaerts, president and chief executive officer, said the new stores are cannibalizing sales from existing stores, with average transaction sizes up by more than 3% while total transaction counts grew by just 1%. "We had a small decrease in the comp-store transaction counts, exactly as would be expected with cannibalization from early growth in new stores in adjacent markets," he pointed out.

The installation of new software at the company's warehouse enabled Smart & Final to improve store inventory levels, Snollaerts said, with fulfillment rates at higher levels and operating costs and productivity rates improving.

Opening a new Southern California warehouse for high-velocity items during the fourth quarter - a facility operated by a third party - helped reduce pressure on the company's

primary warehouse to enable a reduction in costs, he added. "While overall distribution costs are still too high - with the first quarter up 60 basis points over the prior year, including a jump in transportation costs - we have reduced costs 10 basis points in the first quarter from the fourth-quarter level, and I believe we will achieve a better balance of overall distribution costs with sales by midyear," Snollaerts said.

completion of most of the 15 new stores it opened during the 2005 fiscal year.

Smart & Final opened six new stores in 2002, three in 2003 and five in 2004, "so the financial effect of our store opening program has been fairly stable," Phegley noted. "But last year we opened 15 new stores, and because of challenges in product distribution in the middle to latter part of the year, we chose to delay many of those openings to later in the year.

"As a result, we had 13 new stores operating in the first quarter this year - more than we had in the prior year - and because those stores are just beginning to build sales in the slowest quarter of the year, the effect on the income statement was likely greater than if they had opened more evenly throughout 2005."

He said the company is pleased with the overall performance of the new stores as well as the base business.

Etienne Snollaerts, president and chief executive officer, said the new stores are cannibalizing sales from existing stores, with average transaction sizes up by more than 3% while total transaction counts grew by just 1%. "We had a small decrease in the comp-store transaction counts, exactly as would be expected with cannibalization from early growth in new stores in adjacent markets," he pointed out.

The installation of new software at the company's warehouse enabled Smart & Final to improve store inventory levels, Snollaerts said, with fulfillment rates at higher levels and operating costs and productivity rates improving.

Opening a new Southern California warehouse for high-velocity items during the fourth quarter - a facility operated by a third party - helped reduce pressure on the company's primary warehouse to enable a reduction in costs, he added. "While overall distribution costs are still too high - with the first quarter up 60 basis points over the prior year, including a jump in transportation costs - we have reduced costs 10 basis points in the first quarter from the fourth-quarter level, and I believe we will achieve a better balance of overall distribution costs with sales by midyear," Snollaerts said.

1ST-QUARTER RESULTS

Qtr Ended: 3/26/06; 3/27/05

Sales: $446.8 million; $427.6 million

Change: +4.5%

Comp-store: +1.8%

Net Income: $2.5 million; $3.2 million

Change: -21.4%

Inc/Share: 8 cents; 10 cents