LOS ANGELES - Smart & Final here said last week it is testing a variety of promotional programs to drive sales and boost frequency of visits - at the same time it continues to deal with the possible sale of the chain by its Paris-based parent company.
Etienne Snollaerts, president and chief executive officer, said Smart & Final has three promotional tests under way: a retail-oriented value concept in the Pacific Northwest; a stronger focus on beverage activities in larger stores across the chain's geography; and the use of loyalty and reward programs at stores in areas the company is not disclosing.
"We don't think it's time to really make a case for any of them," Snollaerts told industry analysts during a conference call, "but we can see there is potential there and sales are reacting to it - although it's not visible because the tests involve such small samples."
He said the retail value test involves "using what we can do best, which is controlling our costs in managing the stores and trying more to vary the offer on the product side, targeted more to households. The household customer is certainly the fastest growing segment in our stores at the moment, and this program is definitely giving us some flexibility in retail price."
The loyalty tests are aimed at the company's core business customers, who patronized the stores in declining numbers during the second quarter for reasons the company is not sure, Snollaerts noted.
The beverage tests, involving unspecified innovative merchandising approaches, are being conducted at larger stores "to see what it brings to the plate at those stores," he explained. "We don't have a clear-cut solution for smaller stores, but we still have a good balance of merchandising and product sales at those stores."
Rick Phegley, senior vice president and chief financial officer, said the tests are designed "to help us understand what the right formula is to increase share-of-wallet among our business customers."
Regarding the announcement in March by Casino Guichard-Perrachon, Smart & Final's parent company, that it was considering strategic alternatives for non-core assets, Ross Roeder, Smart & Final's chairman, said Smart & Final has appointed a committee of the board to work with Casino. The committee, which includes Roeder, a Casino representative and two independent directors, "is acting on behalf of the board because this kind of thing requires constant diligence," he explained.
The committee meets by phone weekly and reports occasionally to the full board, he said, "and at this stage, that works just fine because it's Casino that's really creating the process. Right now there's no incompatibility between any of our objectives, though at some point there might be."
In May, Smart & Final said it had retained Goldman Sachs to help it consider its strategic alternatives.
For the second quarter that ended June 18, Smart & Final said net income fell 28.5% to $5.8 million, while sales rose 2% to $493.7 million and comparable-store sales dropped 0.3%; for the half, net income declined 26.5% to $8.3 million, with sales rising 3.2% to $940.5 million and comps up 0.7%.
Asked if those results were carrying over into the third quarter, Phegley said, "I don't think we're trying to send a negative message about the [third] quarter."
Smart & Final did not open any new stores during the second quarter, though Snollaerts said the company plans to open "as many stores as possible" through the year.
"But the real estate market has been very hard on the West Coast lately, so we didn't jump on any real estate in the market because people are asking crazy prices - though there's a lot of potential now that Albertsons and some others are disposing of some assets. So we're still very excited with the number of stores that we can open, though we don't have a clear-cut number."
Smart & Final opened 15 new stores last year, "but we're trying to be a little bit more measured [this year]" because the large number of openings late last year created supply chain issues, Phegley pointed out.
