Q1 Sales Up 5.4% at SpartanNash

SpartanNash Co. enjoyed a 5.4 percent boost in its consolidated net sales for the first quarter of its 2017 fiscal year, with mixed results among its operating divisions.

Q1 net sales for the company’s food distribution segment increased $171.8 million to $1.16 billion from $991.1 million in the prior year quarter. SpartanNash officials credited the increase to contributions from the company’s Caito Foods Service acquisition and organic sales growth of 4.2 percent, which more than offset the negative impact of food deflation.

But the company saw a dip in sales for its retail and military operations.

Q1 net retail sales were $596.2 million, compared to $613.1 million for the prior year quarter. The hit was blamed on a 2.2 percent drop in comparable store sales and store closures, partially offset by higher fuel prices.

Meanwhile, net sales for the military segment were $643.3 million, compared to $674.5 million in the prior year quarter, due to lower sales at Defense Commissary Agency-operated commissaries and the shift of New Year’s Day into the first quarter.

“Our solid first quarter performance reflects the successful implementation and execution of our strategy to deliver growth in a challenging environment,” said David Staples, president and CEO. “Despite the ongoing impact of deflation and higher health care costs, we delivered positive results in food distribution as we continue to leverage our network to grow sales. During the first quarter, we began integrating Caito into our operations and further optimizing our network, made significant progress toward launching production in our new Fresh Kitchen facility and prepared for the introduction of private brand products to U.S. military commissaries. Our momentum is strong, and we are excited about the prospects for delivering another year of sales and earnings growth to our shareholders.”

Overall operating earnings improved $7.9 million to $29.6 million from $21.7 million in the prior year quarter. The increase was primarily due to lower restructuring and asset impairment charges compared to the prior year, partially offset by higher merger/acquisition and integration expenses and start-up costs associated with the new Caito Fresh Kitchen operation.

The Fresh Kitchen is a newly constructed facility that allows SpartanNash to process, cook and package fresh protein-based foods and complete meal solutions.

“We are excited about our growth opportunities in fiscal 2017 as we focus on providing value and innovative solutions to our customers and further leverage our expertise and extensive network to drive new and existing business,” Staples said. “Our sales and earnings are positioned to benefit from food distribution growth, contributions from Caito and from ongoing improvements to our supply chain. We continue to anticipate slight inflation in the second half of the year. The customer response to the improvements we have made in our western stores, particularly in Omaha, has been very encouraging.

“For our retail segment, we are on track to achieve comparable store sales in the slightly negative to flat range in 2017. In our military business, we expect to begin shipping DeCA private brand products to commissaries during the second quarter, although we expect limited financial contributions for the year due to the start-up costs associated with the rollout of the program.”

The company is reaffirming its guidance for fiscal 2017, including adjusted earnings per share from continuing operations of approximately $2.26 to $2.35, excluding merger/acquisition and integration costs and other adjusted expenses and gains.

Grand Rapids, Mich.-based SpartanNash distributes grocery products to independent grocery retailers, national accounts, its 153 corporate-owned retail stores and U.S. military commissaries in 47 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain and Egypt.