Spartan Stores Q3 Comp Sales Up 3.3 Percent; Profits Slip as Expenses Rise

Strong same-store sales in its retail division helped spur profit gains on Spartan Stores' continuing operations for the 16-week third quarter ended Jan. 3.

The company said its net income declined 16 percent during the period, primarily as a result to a one-time tax benefit in the year-ago quarter, while operating earnings rose 17 percent to $17.9 million. Sales for the third quarter also dipped slightly by 0.75 percent, to $782 million.

In its retail segment, Spartan's operating earnings were up 58 percent to 6.8 million on a 1.8 percent sales gain to $384 million, while its distribution segment's operating earnings were also up about 1.8 percent to $11.1 million on a 3.4 percent sales decline to $398 million. According to the company, this decline was mainly attributable to lower pharmacy product sales of some $9 million and the loss of about $2.6 million in distribution sales to VG's Food and Pharmacy, which Spartan acquired last year.

The Grand Rapids, Mich.-based company's year-to-date net income rose 14 percent to $29.9 million on a sales gain of 4.7 percent to $2 billion.

"We are very pleased to be extending our track record of double-digit profit growth, particularly in the present economic climate," said Dennis Eidson, Spartan's CEO. "Our operating earnings growth is being driven by our retail store acquisitions and capital investment program.” Regarding Spartan's 10th consecutive quarter of same-store sales growth, Eidson said value-oriented products and services, private label, fuel rewards, $4 generic prescription program "and other consumer-centric offerings are gaining traction by better serving consumers' needs."

Looking ahead, Eidson said the company will continue to adjust its marketing, merchandising and promotional programs within its entire retail operations "to appropriately balance the need to deliver good customer value, while improving store performance and overall profitability during this challenging time."

Spartan's capital expenditures for fiscal 2009 are expected to range from $58 million to $60 million, with depreciation and amortization ranging from $26 million to $29 million and interest expense of approximately $11 million, added Eidson.
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