Smart & Final Stores said Wednesday it expects to get approval in the next few days to acquire 32 Haggen stores and to convert and reopen them under its Smart & Final Extra banner by mid-2016.
Of the 32 units, 27 will be net new stores and the other five will be relocations for existing stores, Dave Hirz, president and CEO, said.
The company also said it expects to open between six and eight additional Extra stores in 2016 for an annual growth rate of 15% to 16%, though Hirz said it will return to its normal 10% annual growth rate in 2017.
All the acquired stores — in central and Southern California — will enable the company to continue densing up in certain existing markets, including doubling its presence in the San Diego market, Hirz noted.
He said he expects the 32 stores to “resonate well with customers” once they reopen under the Smart & Final Extra banner because prices will be approximately 17% below Haggen prices” and also because the merchandising initiatives Smart & Final has introduced in the last year “make the stores a complete shopping experience,” he added.
Of the 32 stores, 12 are larger than Smart & Final’s footprint, he noted, but the company plans to occupy 30,000 square feet of those units and lease the rest of the space, “which we do all the time,” Hirz noted. “Surprisingly, 20 of the stores are already the right size for us, covering approximately 31,000 square feet,” he added.
Hirz said Smart & Final is paying $140 million for the 32 stores, excluding inventory — slightly more than $4 million per location, compared with the $3.2 million it usually spends to open a new store.  
“But these stores will open stronger because they are in good locations, and when they were operated by Vons and Albertsons, they had high volumes.  In addition, they have mature leases, so rents are approximately 40% lower than what we would pay for most new properties.”

Hirz said Smart & Final expects it will take three weeks to convert smaller stores and seven weeks to convert larger ones, with the process set to begin in December.
Hirz made his remarks during a conference call with investors to discuss financial results for the third quarter ended Oct. 4.
Net income for the 16-week quarter rose 21.1% to $12.4 million, while sales increased 10.1% to $1.3 billion and comparable store sales climbed 4.8%, encompassing a 5% increase in transaction counts and a 0.2% decline in average transaction size. Comps for the quarter rose 5.5% in the Smart & Final banner and 2.9% in the Cash & Carry banner.
For the year to date net income increased 8.9% to $28.3 million, with sales rising 10.3% to $3 billion and comps growing 4.8%, including a 4.5% increase in transaction counts and a 0.2% increase in average transaction size. Comps in the Smart & Final banner rose 4.6% during the 40-week period, while comps for the Cash & Carry banner rose 5.3%.