Net Sales, Comp Sales, Traffic – All Up at SpartanNash

Persistent inflation affects several aspects of company’s Q1 performance

5/31/2023

Amid macroeconomic challenges, SpartanNash reported higher sales and a decline in net earnings for the opening fiscal quarter.

SpartanNash ended its first quarter with a 5.2% lift in net sales to top $2.91 billion and a 5.4% gain in retail comp sales on a year-over-year (YoY) basis.

In an uneven overall operating market and at a time when the company is investing in multiple transformation efforts, net earnings declined from $19.3 million to $11.3 million during the opening period of the fiscal year. Still, earnings per share for the quarter exceeded analyst expectations and the adjusted EBITDA remained steady, coming in at $76.8 million versus $76.6 million compared to the same time last year.

President and CEO Tony Sarsam reported that the food solutions company remains on track to meet its targets. “Our strong first quarter results were driven by operational excellence amid a challenging macroeconomic environment, which sets us up to achieve our full-year guidance," he said. "The improved year-over-year performance reflects the success of our transformational initiatives, which we believe will continue to yield cost savings and significant benefits for our wholesale customers, retail shoppers and shareholders. We are building momentum on our long-term plan, and we expect this transformation to drive shareholder value for years to come."

Drilling down on Q1 results, the YoY improvement in net sales was attributed to growth in SpartanNash’s wholesale and retail segments. That growth was fueled in large part by inflation. At the same time, the company’s decrease in gross profit stemmed from lower inflation-related price change benefits in the wholesale business and lower margins in the pharmacy segment. The company also noted that the lower gross profit rate was partially offset by benefits from merchandising transformation initiatives and higher volume within the military channel.

Given SpartanNash’s structure spanning wholesale, retail and military sectors, performances varied across those areas. Within the wholesale business, net sales went up 5.2% during Q1. Here, too, inflation played a role in the lift, as did a boost in volume in the military channel.

Meanwhile, SpartanNash's 144 company-owned retail stores brought in $40.4 million in net sales during Q1, a 5.2% YoY bump. Inflation was also a driving factor within brick-and-mortar locations.

Per Sarsam’s summation, SpartanNash reaffirmed its previous guidance for the rest of its fiscal year, projecting net sales between $9.9 billion and $10.2 billion. The quarterly performance also reflected the company’s supply chain and merchandising transformation programs, which are expected to yield net benefits of $40 million to $55 million by the end of the long-term plan period.

During a webcast recapping the quarterly performance, Sarsam said that consumer behaviors during the period exemplify the resilience of shoppers as they make inflation-related adjustments while striving to maintain their lifestyles. “Overall, our traffic is actually up for the quarter versus last year by a little bit. And what we are seeing in the basket is an interesting mix,” he said. “Price per unit is about the same as the rate of inflation and the mix in the basket is a combination of people seeking out ways to save money, including through Our Family brands, while still seeking out opportunities for convenience or indulgence.” He cited an example of robust sales of fresh cut fruit and vegetables, which are sold at a higher price point, but address shopper interest in saving time.

SpartanNash EVP and CFO Jason Monaco underscored the strength of the Our Family portfolio. “Our penetration in private label continues to grow. We are in the low-20s in growth overall and delivered growth in private label about 50% higher than comps,” he said during the earnings call.

Grand Rapids, Mich.-based SpartanNash operates two complementary business segments – food wholesale and grocery retail. Its global supply chain network serves wholesale customers that include independent and chain grocers, national retail brands, e-commerce platforms, and U.S. military commissaries and exchanges. On the retail side, SpartanNash operates 144 brick-and-mortar grocery stores, primarily under the banners of Family Fare, Martin's Super Markets and D&W Fresh Market, in addition to dozens of pharmacies and fuel centers. The company is No. 41 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America.