SFS’s geographic footprint
Smart & Final Stores (SFS) operates 290 stores across six adjoining states in the western United States along with 16 stores in northwestern Mexico. While the Smart & Final (or S&F) banner operates mainly in California, Arizona, and Nevada, the Cash & Carry Foodservice (or C&C) banner is present in Washington, Oregon, northern California, Idaho, and Nevada.
Concentration in California
More than 75% of the company’s stores are based out of California. The company plans to further increase its footprint in the state. It recently acquired 33 stores from the Haggen store banner. SFS believes that the California market can support an additional 100 S&F stores in the next four years.
Competition in California
California houses a large number of supermarkets and warehouses. From supermarket chains such as Trader Joe’s, Sprouts Farmers Market (SFM), and Whole Foods Market (WFM) to warehouse clubs such as Costco (COST) and Walmart’s (WMT) Sam’s Club, all have presences in this western US state. In fact, Costco derived about 31% of its total US sales from its California operations in 2015.
SFS is looking to further expand in the US market. The company believes that there is enough room to grow beyond its existing and adjacent markets. It has plans to expand mainly by adding new Extra! stores.
The company believes that existing and adjacent markets can support more than 180 new Extra! stores, while the overall US market has the potential to support more than 1,250 additional Extra! stores.
Investors looking for exposure to Smart & Final Stores through ETFs can invest in the SPDR S&P Retail ETF (XRT) or the WisdomTree SmallCap Earnings ETF (EES). SFS has weights of ~0.26% and ~0.11%, respectively, in the above-mentioned ETFs.
Continue to the next section to find out more about the company’s strategies.