Q1 Sales, Earnings Up at Spartan
Spartan Stores Inc.'s consolidated net sales for the first quarter of its 2014 fiscal year increased 1.4 percent to $612.4 million, compared to $603.9 million last year, due to higher sales in the distribution and retail segments.
As anticipated, sales for the quarter ending June 22 were negatively affected by the calendar shift of the Easter holiday selling week into the fourth quarter of fiscal 2013. Q1 comparable store sales were also impacted by the cycling of the launch of the price-freeze campaign and unfavorable weather conditions as compared to a year ago.
Adjusted earnings increased 5.2 percent to $23.8 million, or 3.9 percent of net sales, compared to $22.6 million, or 3.8 percent of net sales last year. Adjusted earnings from continuing operations were $6.5 million, or 30 cents per diluted share, compared to $5.4 million, or 25 cents per diluted share, last year.
“We are pleased with our ability to generate improved first quarter financial results despite the negative effect of the Easter calendar shift and generally unfavorable weather conditions compared to the prior year,” said Dennis Eidson, Spartan’s president and CEO. “Our adjusted earnings from continuing operations exceeded our guidance and we generated increased cash flow from operations for the quarter driven by an operating margin improvement in our retail segment. We benefited from the acquisition of a retail store late in the prior year third quarter, new customer gains, the growing traction of our Yes Rewards loyalty program and increased fuel sales, as well as our continued disciplined expense management. We continue to refine our promotion and loyalty programs and to introduce new private brand products to provide even more value to our retail and distribution customers in today’s economy.”
Q1 gross profit margin was 20.5 percent compared to 20.2 percent in the first quarter of the prior year. The gross profit margin rate increase reflects an improved performance in the company’s retail segment driven primarily by the cycling of the launch of the price-freeze campaign in the prior year.
Net sales for the distribution segment increased 0.1 percent to $258.6 million in Q1 from $258.3 million in the same period last year. Net retail sales increased 2.4 percent to $353.8 million from $345.6 million in the same period last year.
Comparable store sales, excluding fuel, decreased 2.9 percent due to a 90 basis point negative impact from the Easter holiday calendar shift, which moved the strong selling week prior to the Easter holiday into the fourth quarter of fiscal 2013.
During Q1, the company completed two minor remodels and store re-banners, ending the quarter with 101 corporate-owned stores and 30 fuel centers.
“We remain confident in the plans we have in place to deliver our sales and earnings outlook for fiscal 2014, including investing in the consumer experience, increasing our remodeling efforts, introducing new private brand products and improving productivity across our operations," Eidson said, noting Q2 plans to complete four minor remodels and one major remodel, and to open one new Valu Land store in the Lansing market.
“Additionally, we continue to focus on our integration plan for our recently announced merger with Nash Finch. We are a very disciplined organization and the integration will be a critical priority for us. I am confident in the realization of the $50 million in anticipated cost synergies from this transaction, which were vetted by both organizations. These synergies, along with the strategic opportunities provided by the combined organization and the future flexible financial structure will allow the combined entity to execute our strategic vision and deliver continued value to associates, shareholders and other partners.”
The company expects Q2 comparable store sales will be slightly negative to slightly positive as the company cycles through the previously mentioned impacts and the weather returns to more seasonal conditions. Q2 earnings from continuing operations are expected to be above the prior year's results when excluding expenses related to the merger.
Spartan continues to expect capital expenditures for FY 2014 to be $39 million to $42 million.
Grand Rapids, Mich.-based Spartan Stores Inc. distributes more than 40,000 private and national brand products to 390 independent grocery locations in Michigan, Indiana and Ohio, and to 102 corporate-owned stores in Michigan, including Family Fare Supermarkets, Glen's Markets, D&W Fresh Markets, VG's Food and Pharmacy, Forest Hills Foods and Valu Land.