After weathering a tough 2016, Smart & Final is confident that pressures will ease this year, which — combined with merchandising and marketing initiatives — should result in positive comparable-store sales growth in 2017.
For the full year ending Jan. 1, 2017, the warehouse-style retailer increased net sales 9.3% to $4,341.8 million. But comparable store sales slipped 0.5%, driven by deflation in several categories as well as cannibalization from new-store openings.
Despite the challenges Smart & Final faced last year, president and CEO David Hirz pointed to a period of unprecedented store growth.
"Our 2016 store development included the successful integration of a major acquisition resulting in the largest number of new Smart & Final Extra! stores in a single year in the company's history, and we simultaneously expanded our Cash & Carry banner. We continue to build upon our differentiated brand message as the one-stop shop for business and household needs, and to communicate Smart & Final's unique banner propositions to both new and existing customers," Hirz said.
Essential to delivering higher product margins while helping build customer traffic and basket size, therefore, is the ability to tailor its product offering in a way that accommodates the evolving needs of its customer base. And the key to boosting comparable-store sales in 2017 may rest, in part, with growing it private label brands.
In 2016, Smart & Final added more than 110 private label items, and there are plans to continue testing newer merchandising initiatives, including cut fruit, craft beer, gourmet cheese, bakery and sushi in selected stores.
“Our private label offering is incredibly important to Smart & Final, providing our customers with high-quality products at exceptional values with higher average product margin rates. We focus on innovation within our private label offerings and expect to continue to grow our penetration of private label sales in 2017,” Hirz added.
Hirz said that a lot of the retailer’s focus tends to be on Sun Harvest and First Street. He confirmed that much of the growth in private label the last couple of years has come from Sun Harvest. In the fourth quarter, the natural and organic private brand soared 57%. Meanwhile, the First Street brand makes up about 78% of all private label sales.
Don’t count out the retailer’s Simply Value private brand. Hirz acknowledged that Simply Value tends to perform better when the economy is really weak. So although it has done better in the past than it has in recent quarters, the brand is still growing and accounted for 6% of private-label sales in 2016.