Q3 Net Sales Up at SpartanNash
SpartanNash Co. enjoyed a 1.4 percent boost in its consolidated net sales during its third quarter ending Oct. 8.
Sales for the 12-week third quarter increased to $1.8 billion from $1.78 billion in the prior year quarter, driven primarily by increases in the food distribution segment.
Reported operating earnings improved to $29.9 million from $29.2 million in the prior year quarter primarily due to sales growth at food distribution and lower operating expenses due in part to lower depreciation as well as productivity and efficiency initiatives, which offset the negative impact of deflation in all segments. Adjusted operating earnings improved to $35.1 million from $34.8 million a year ago.
“We are pleased with our ability to overcome the continued challenging economic conditions and prolonged deflationary environment to deliver third quarter sales and earnings growth,” said Dennis Eidson, SpartanNash's CEO. “These results reflect the strength of our strategy to provide innovative and impactful solutions for our food distribution and retail customers as we benefited from new customer supply agreements and our third consecutive quarter of improved retail comparable store sales trends.”
Gross profit margin for the third quarter was 14.2 percent compared to 14.6 percent in the prior year quarter primarily due to the mix of business operations and the impact of continued deflation.
“During the quarter, we continued to invest in our merchandising, pricing and promotional initiatives, including expanded produce and private brand product offerings, as well as the continued rollout of Open Acres,” Eidson said. “We also celebrated the grand re-openings of our newly remodeled Omaha stores with encouraging results. In addition, we realized further benefits from our ongoing investments in our supply chain network.”
Quarter-three operating expenses decreased to $225.4 million, or 12.5 percent of sales, from $229.8 million, or 12.9 percent of sales, in the prior year quarter.
Food Distribution Segment
Net sales for the food distribution segment increased to $804.5 million from $762.3 million in the prior year quarter primarily due to new business gains as well as the growth of certain existing accounts, which more than offset the impact of continued deflation.
Retail Segment
Net sales for the retail segment were $489.0 million in the third quarter compared to $507.2 million for the prior year quarter. Comparable store sales for the quarter, excluding fuel, improved to -1.8 percent from -3.0 percent in the second quarter.
During the third quarter, the company opened one new fuel center and closed one store upon lease expiration, ending the quarter with 159 company-owned retail stores, 79 pharmacies, and 30 fuel centers.
Military Segment
Net sales for the company's military segment increased to $506.6 million from $506 million in the prior year quarter. The increase was due to new business gains associated with the distribution of fresh products, partially offset by continued lower sales at the Defense Commissary Agency (DeCA) operated commissaries.
Outlook
The company is narrowing its previously issued fiscal 2016 guidance of adjusted earnings per diluted share from continuing operations to approximately $2.09 to $2.16, excluding merger integration costs and other adjusted charges and gains, compared to $1.98 in the prior year. The company anticipates that reported earnings from continuing operations will now be in the range of approximately $1.58 to $1.65 per diluted share, compared to $1.67 in the prior year. The guidance reflects the continuation of negative comparable retail store sales and the variability associated with deflation and its related positive impact on LIFO.
The company expects capital expenditures for fiscal year 2016 of $72 million.
“While we anticipate continued deflationary pressure for the remainder of the year, we are confident that we will continue to improve our top line performance as we deliver value to our food distribution and retail customers through our solutions-focused approach and commitment to exceeding our customers’ expectations,” Eidson said. “We expect our targeted capital investments and enhancements to our merchandising, pricing and promotional strategies will offset some of the deflationary and competitive pressures in the retail segment. In our food distribution and military network, we continue to allocate resources to drive new business development, which will better enable us to pursue opportunities within the alternative channel space.”
Grand Rapids, Mich.-based SpartanNash’s core businesses include distributing grocery products to independent grocery retailers, national accounts, its corporate owned retail stores, and U.S. military commissaries. SpartanNash serves customer locations in 47 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain and Egypt. SpartanNash currently operates 159 supermarkets, primarily under the banners of Family Fare Supermarkets, Family Fresh Market, D&W Fresh Market and Sun Mart.