Sales Mixed for SpartanNash in Q2
Food distribution continues to be a bright spot for SpartanNash Co. while the grocery operator reported sales dips in its retail and military segments for its fiscal 2017 second quarter.
Overall, Q2 consolidated net sales increased from $67.1 million to $1.89 billion from $1.83 billion in the prior year quarter, driven by contributions from the Caito Foods Service acquisition and organic growth in the food distribution segment.
But net sales for SpartanNash’s retail segment dropped to $482 million in Q2, compared to $501.8 million a year ago. The drop is blamed on lower sales due store closures and sell-offs, as well as a 1.8 percent decrease in comparable store sales.
Likewise, sales dropped in the company’s military segment, to $471.1 million from $505.4 million in the year-ago period, primarily due to lower sales at Defense Commissary Agency-operated commissaries served by SpartanNash.
“We continue to be very pleased with our food distribution segment’s performance despite challenging retail market conditions, as the creative solutions we offer our customers continue to contribute to their success as well as ours,” said David Staples, SpartanNash president and CEO. “On a consolidated basis, we delivered both top-line and earnings growth primarily due to increases in our food distribution segment and from ongoing improvements to our supply chain.”
Easing deflation
Staples said the ease in deflation helped the company mark its first quarter without deflation in nearly a year.
“While the integration of our latest acquisition and the start-up of our new Fresh Kitchen facility have been slower than anticipated, we are excited about the potential they provide for both the fresh-cut fruits/vegetables and freshly prepared meal solution offerings, which are right in line with the ever-increasing consumer demand for convenience,” Staples said.
In Q2, SpartanNash began shipping private brand products to U.S. military commissaries, a rollout that will continue through the second half of the year. “Additionally, at the beginning of the third quarter, we entered into an agreement to obtain all of the commissary distribution business from a DeCA provider exiting the business in the Southwest. We expect these two events to reverse the current military trends to positive by the fourth quarter,” Staples said.
Overall operating earnings improved to $38.9 million from $32.6 million in the prior year quarter. Earnings for the food distribution segment increased to $23.2 million from $19.2 million, to $13.2 million from $10.9 million in the retail segment, and to $2.5 million from $2.2 million for military operations.
“It is an exciting time at SpartanNash given the growth we are experiencing with our distribution customers and the new arenas we are entering, the positive changes we are bringing to our military business, and the continued enhancements we are making in our retail operations,” Staples said. “We remain confident in our strategy and believe our expertise as a food wholesaler and retailer gives us a unique competitive advantage and enables us to deliver best-in-class solutions to our food distribution and retail customers.”
New CFO
Additionally, SpartanNash announced the appointment of Mark Shamber as EVP and CFO, effective Sept. 11.
Shamber previously served as CFO of specialty and organic food distributor United Natural Foods Inc. After leaving UNFI at the end of 2015, he was an independent consultant and served as vice chairman on the board of directors of Day Kimball Healthcare Inc. Shamber previously held posts at Ernst & Young and Reebok International.
"Mark’s expertise in the food distribution industry, especially in the natural and organic space and with independent grocers and national chains, as well as his overall M&A prowess make him an excellent fit for SpartanNash and will help drive our future success,” Staples said.
Shamber succeeds Tom Van Hall, whom Staples praised as “a critical member of our finance team for more than 14 years,” who has been the company’s interim CFO since this past July following the resignation of former CFO Christopher Meyers.
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 150 supermarkets, primarily under the banners of Family Fare Supermarkets, VG’s Food and Pharmacy, D&W Fresh Market, Sun Mart and Family Fresh Market.