With more than two-thirds of its customer base coming from the consumer segment rather than business shoppers, Smart & Final Stores plans to launch a brand-awareness campaign early next year for its Extra banner stores, Dave Hirz, president and CEO of the non-membership warehouse chain, told analysts.
The mix of customers is 68% consumers, 32% business, compared with a 60-40 ratio four years ago and a broader span in prior years, Hirz told SN.
Asked if consumers understand that Smart & Final Extra stores are larger and carry an additional 10,000 household products, including a broader perishables assortment that includes natural and organic offerings, bulk foods and fresh seafood, Hirz replied, “Most consumers don’t get it because we haven’t done the best job communicating with them.”
That will change, he said, now that the company has hired Eleanor Hong from Kohl’s as SVP, marketing, to help direct the new branding campaign “so consumers understand what Smart & Final Extra is all about.”
The company has also hired Joe Van Dette from Toys R Us as VP, digital marketing, “so we can make some moves in that direction,” Hirz said.
Smart & Final does not intend to boost its marketing budget beyond the current level of 1% of sales, he added, pointing out the company was able to eliminate 1.5 million weekly mailers — 15% of the total — during the third quarter, “and we will use that money to invest in our branding and digital effort.”
For the 16-week third quarter ended Oct. 5 — its first as a public company since an initial public offering in September — Smart & Final saw net income increase 1.9% to $10.2 million, with sales climbing 10.8% to $1.1 billion and comparable store sales up 6.6%, including an increase of 4.7% at Smart & Final stores and 11.8% at Cash & Carry.
For the 40-week period net income increased 57.3% to $23.8 million, while sales rose 9.2% to $2.7 billion and overall comps rose 5.8% — 4.4% at Smart & Final and 9.9% at Cash & Carry.
Smart & Final operates 252 stores — 200 Smart & Final-banner locations in California, Arizona and Nevada, including 90 Extra units; and 52 Cash & Carry Smart Foodservice locations in California, Oregon, Washington, Idaho and Nevada.
Hirz said 90% of sales at Cash & Carry come from business customers. The company plans to grow its store base at a rate of 10% a year, with 20 additional locations scheduled for 2015, including six conversions of legacy Smart & Final stores to the Extra format and three relocations of legacy stores into larger spaces under the Extra banner. Hirz said there are still at least 100 legacy stores that could ultimately be converted.