Distribution, Military Continue to Drive SpartanNash Growth
Food distribution and military segments are driving growth at retailer-wholesaler SpartanNash Co., which reported a 1.3 percent boost in its consolidated net sales for its first quarter ending April 21.
Net sales rose $31.3 million over the prior year quarter to $2.39 billion. Distribution and military operations increased 3.7 percent and 3.2 percent, respectively. But gains were offset by declining retail sales, including a 2.2 percent drop in same-store sales.
“We are pleased with our performance in the first quarter and continued resilience in a challenging and evolving landscape,” said David Staples, SpartanNash president and CEO. “Once again, we delivered on our financial and strategic objectives and remain on track to achieve our guidance for the year. Sales were driven by strong growth in the food distribution and military segments as we benefited from our key initiatives to drive sales with both new and existing customers.”
Despite the drop in retail performance – $566.2 million compared to $596.2 million a year ago – a number of “innovative concepts” contributed to a sequential improvement in comparable store sales this quarter, Staples said.
“Early in the first quarter, we cycled the acquisition of Caito Foods Service and Blue Ribbon Transport, and are pleased to report that with the management team and systems now in place at Caito, we are experiencing improved trends in both productivity and profitability,” he said.
Gross profit for Q1 was $343.2 million, or 14.4 percent of net sales, compared to $357.4 million, or 15.2 percent of net sales, in the prior year quarter. Operating expenses were $317.5 million, or 13.3 percent of net sales, compared to $327.8 million, or 13.9 percent of net sales, a year ago. The company reported operating earnings of $25.7 million compared to $29.6 million in the prior year quarter.
Net sales for the food distribution segment increased $41.1 million, or 3.7 percent, to $1.16 billion from $1.11 billion in the prior year quarter, primarily due to sales growth from existing customers.
Net sales for the military segment increased $20.3 million, or 3.2 percent, to $663.6 million from $643.3 million in the prior year quarter. The increase was primarily due to new commissary business in the Southwest and incremental volume from the private brand program, partially offset by lower comparable sales at Defense Commissary Agency operated locations.
Net sales for the retail segment were $566.2 million in the first quarter compared to $596.2 million in the prior year quarter. The decrease in net sales was primarily attributable to $21.3 million in lower sales resulting from the closure and sale of retail stores, as well as a 2.2 percent decrease in comparable store sales, which exclude fuel. These decreases were partially offset by higher fuel prices compared to the prior year quarter.
"We continue to be pleased with our ability to grow sales volumes, specifically in the food distribution and military segments, as we enhance and develop new and innovative solutions for our customers," Staples said. "This innovative spirit and our team’s ability to attract new customers, as well as help existing accounts grow, has us excited about our prospects for 2018 and beyond. In our food distribution segment, we are making investments to optimize our network and better serve our customers, and as a result, we anticipate incremental sales with our high-growth food distribution customers."
Continued Staples: "We are also excited about the progress made to date with our food processing operations and look forward to realizing additional sales volume over the remainder of the year. In our military segment, new commissary business in the Southwest will benefit sales comparisons for the first half of 2018 and the ongoing expansion of the DeCA private brand program will also drive sales growth."
Staples noted that he expects retail comps trends to improve to slightly negative to flat by the end of the year as stores benefit from several new "innovative concepts and initiatives." While higher transportation costs are anticipated to remain a headwind, the company is working to mitigate the impact across all segments.
"We believe that our strategic initiatives combined with the strength and stability of our extensive distribution network will enable continued growth," he stated.
Grand Rapids, Mich.-based SpartanNash’s core businesses include distributing grocery products to independent grocers, national accounts, its corporate-owned retail stores and U.S. military commissaries and exchanges. SpartanNash serves customer locations in all 50 states and Washington, D.C., as well as abroad. SpartanNash currently operates 142 supermarkets, primarily under the banners of Family Fare Supermarkets, D&W Fresh Market, VG’s Grocery, Dan’s Supermarket and Family Fresh Market.