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Smart & Final Posts 'Very Strong' 3Q Results

LOS ANGELES - Warehouse store operator Smart & Final, Inc. reported income from continuing operations of $12 million for the 16-week quarter ended Oct. 3, a rise of $3.7 million, or 44 percent, over last year's third-quarter income from continuing operations of $8.3 million.

On a per diluted share basis, income from continuing operations was 37 cents, an increase of nine cents, or 32 percent, over the 28 cents per diluted share reported in the same period last year.

Sales from continuing operations amounted to $603.2 million, an increase of 12.0 percent over third-quarter 2003 sales of $538.4 million. Third-quarter 2004 comparable-store sales went up 12.0 percent over the 2003 level.

President and c.e.o. Etienne Snollaerts said in a statement: "In the third quarter we continued to grow our sales at double-digit rates, reflecting in both of our store concepts [Smart & Final, focused on foodservice and household markets, and United Grocers Cash and Carry, focused exclusively on foodservice professionals] a strong value position and truly unique merchandise mix. Our income from continuing operations increased at a higher rate than the sales increase, due to lower interest expense resulting from debt reduction following last year's restructuring and divestiture activities, as well as modest improvement in our margins."

Snollaerts continued: "Throughout our store system we experienced a strong summer and early fall period with increased levels of customer visits and average transaction size. In addition to our own efforts in marketing and merchandising to existing customers, these trends were bolstered in part by good weather and continued attraction of new customers to our stores."

During yesterday's conference call discussing the results, Snollaerts pointed out: "All in all, our third quarter is very strong, but we are also saying that the near-term waters appear somewhat turbulent," citing as the "chief unknowns" competitor actions and inflation.

Smart & Final recorded an after-tax loss of $0.3 million from the effect of discontinued operations, primarily the closure of broadline foodservice distribution operations in Northern California and Florida, and the divestiture of its retail stores operation in the Florida market. The company also recorded an after-tax loss of $7.4 million from discontinued operations reflecting after-tax charges of $5.2 million related to the sale and divestiture of the discontinued operations, and after-tax operating loss from discontinued operations of $2.2 million. Including the effect of discontinued operations, net income for the 16-week quarter ended Oct. 3 was $11.7 million, or 36 cents per diluted share. Factoring in the effect of discontinued operations, third-quarter 2003 net income was $0.9 million, or three cents per diluted share.

The company opened one store, in Spokane, Wash., during the third quarter of 2004. Smart & Final operated 231 stores at the end of the 2004 third quarter, vs. 229 stores at the end of the 2003 third quarter, as reported on a continuing-operations basis.
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