Inflation Lifts SpartanNash Q4, Fiscal 2022 Net Sales

Company also raises long-term net sales target, reaffirms commitment to 2025 strategic plan
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Through the continued implementation of its Our Winning Recipe strategy, which includes supply chain and merchandising transformation initiatives, SpartanNash anticipates the growth of its fiscal 2025 long-term financial targets.

For its 12-week fourth quarter ended Dec. 31, 2022, food solutions company SpartanNash reported net sales of $2.3 billion for the quarter, a 10.3% increase from the $2.1 billion logged in the prior-year quarter. SpartanNash attributed this growth to increases in both its wholesale and retail segments, which were favorably affected by inflationary pricing.

For the company’s 52-week fiscal year 2022, net sales were $9.6 billion, an 8.0% increase from the $8.9 billion reported in the year-ago period, also attributed to net sales growth in both the wholesale and retail segments. Partly offsetting these fiscal year increases were case volume declines of 2.6% in the wholesale segment and item declines of 1.9% in the retail segment.

[Read more: "SpartanNash Appoints New VP of Fuel Center and C-Stores"]

Q4 net sales for wholesale increased $151.2 million, or 10.2%, to $1.63 billion, from $1.48 billion in the year-ago quarter. According to SpartanNash, the increase in net sales was mainly because of the inflationary impact on pricing, which increased net sales by 11.8% compared with the prior year, while lower case volumes decreased net sales by 1.6% versus the prior year. Net sales for retail grew $64.4 million, or 10.5%, to $677.5 million for Q4, from $613.1 million in the prior-year quarter. Retail comps increased 9.1% for the quarter, having risen by 11.2% due to inflation and fallen 2.1% due to reduced item counts, and grew 7.7% for the fiscal year. 

SpartanNash’s gross profit in Q4 was $341.4 million, or 14.8% of net sales, compared with $322.7 million, or 15.4% of net sales, in the prior-year quarter. According to the company, the gross profit increase was driven by higher sales, while the gross margin rate decline was due to cycling of inflation-related price gains in the prior year and a rise in last-in-first-out (LIFO) expense of $5.7 million, or 21 basis points.

“Our team continues to execute on Our Winning Recipe, which led to solid fourth-quarter results and fiscal 2022 performance that exceeded expectations,” noted SpartanNash President and CEO Tony Sarsam. “Our strategy is driving sustainable growth, and I am proud that our supply chain and merchandising transformation initiatives will continue to generate significant benefits for our customers, store guests and suppliers in 2023 and beyond. Thank you to our dedicated associates who consistently demonstrate operational excellence, giving us confidence we will reach our long-term growth and profitability targets.”

The company’s net earnings were $0.7 million, or 2 cents per diluted share, for the quarter, compared with $22.2 million, or 62 cents per diluted share, in the prior-year quarter, while net earnings for the fiscal year were $34.5 million, or 95 cents per diluted share, compared with $73.8 million, or $2.05 per diluted share, in the prior fiscal year. SpartanNash said that this earnings decline was primarily attributable to higher LIFO expense of $38.2 million; higher corporate administrative costs, including increased incentive compensation of $21.6 million; upfront investments in the merchandising transformation initiative of $10.6 million; costs related to shareholder activism of $7.3 million; lower retail margin rates; the transition impact of the new paid-time-off policy in the prior year of $21.4 million; and higher interest expense of $8.9 million. These were partly offset by increased sales, an improved wholesale gross margin rate, and supply chain cost reductions as a result of efficiencies realized and lower fees associated with the company’s supply chain transformation initiative, as well as lower health insurance costs.

Purchases of property and equipment came to $97.3 million for fiscal 2022, versus $79.4 million in the prior year, while capital expenditures and IT capital totaled $102.1 million for fiscal 2022, compared with $85.8 million last year.

SpartanNash expects wholesale net sales to grow 4.0% to 7.0%, including the net sales from recently acquired grocery wholesaler Great Lakes Foods, and it anticipates that retail comps will grow 2.0% to 5.0%. The company expects that its annual interest expense will range from $37 million to $42 million. During Q1 2023, SpartanNash will cycle a significant inflation-related price change benefit of almost $10 million, as well as $4 million in retail wage investments. It expects that the benefits from its supply chain and merchandising transformation initiatives won’t fully offset these headwinds in Q1 2023. 

Through the continued implementation of its Our Winning Recipe strategy, the company anticipates the growth of its fiscal 2025 long-term financial targets: net sales to more than $10.5 billion (previously $10 billion), an increase of at least 17% from fiscal 2021, and adjusted EBITDA to more than $300 million, an increase of at least 40% from fiscal 2021. These targets are expected to be achieved through such initiatives as:

  • Increasing net sales by more than $1 billion through customer acquisition and continued expansion into value-added offerings.
  • Realizing benefits of $125 million to $150 million during fiscal 2021 through fiscal 2025 from the supply chain and merchandising transformation initiatives, as well as ongoing marketing innovation.
  • Growing shareholder value through continued focus on return on capital.

SpartanNash’s core businesses include distributing grocery products to independent and chain retailers, its corporate-owned retail stores, and U.S. military commissaries and exchanges, as well as fresh produce distribution and fresh food processing. No. 41 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America, the Grand Rapids, Mich.-based company serves customer locations in all 50 states and the District of Columbia, Europe, Cuba, Puerto Rico, Honduras, Iraq, Kuwait, Bahrain, Qatar and Djibouti. SpartanNash also operates 147 supermarkets and employs 17,500-plus associates.

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