Smart & Final Stores reported financial results for the fiscal third quarter ended October 7, 2018.
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Net sales were $1,497.7 million in the 16-week quarter ended October 7, 2018, representing a 2.8% increase as compared to $1,457.4 million for the same period of 2017.
Net sales growth was driven by a 0.6% increase in comparable store sales and from the net sales contribution of new stores.
Comparable store sales growth was comprised of a 1.9% increase in comparable average transaction size, partially offset by a 1.3% decrease in comparable transaction count. The company estimates that the year-to-year deflation rate in product pricing was -0.7% in the third quarter.
Net sales for Smart & Final banner stores were $1,144.1 million, a 2.6% increase as compared to $1,115.2 million for the same period of 2017. Comparable store sales growth for the Smart & Final banner was 0.2% in the third quarter.
Net sales for Smart Foodservice Warehouse banner stores were $353.6 million, a 3.3% increase as compared to $342.1 million for the same period of 2017. Comparable store sales growth for the Smart Foodservice Warehouse banner was 2.0% in the third quarter.
Gross margin was $232.4 million, an 8.7% increase as compared to $213.9 million in the third quarter of 2017. Gross margin rate was 15.5% as compared to 14.7% for the same period of 2017. Gross margin rate in the quarter was supported by the Company's strategic sourcing, merchandising and pricing initiatives.
Operating and administrative expenses were $209.9 million, a 7.5% increase as compared to $195.3 million for the same period of 2017. This increase was related to expenses associated with the effect of higher minimum wage rates, as well as new stores opened during the prior twelve months and their related support costs.
Interest expense in the third quarter was $13.3 million, an 18.0% increase as compared to $11.2 million in the prior year quarter, primarily driven by higher interest rates as well as interest expense related to accounting for build-to-suit store developments.
The third quarter results reflect an effective tax rate benefit of approximately 2% which includes a $2.9 million discrete tax benefit related to accelerated depreciation deductions included in the Company's 2017 income tax return and the effect of the 2017 Tax Cuts and Jobs Act.
Net income was $10.2 million, or $0.14 per share, as compared to net income of $5.1 million, or $0.07 per share, for the same period of 2017. Adjusted net income was $16.9 million, or $0.23 per share, as compared to adjusted net income of $12.9 million, or $0.17 per share, for the same period of 2017.
Adjusted EBITDA was $62.3 million, a slight decrease of 1.0% as compared to $62.9 million for the same period of 2017. ■