Spartan Stores Q3 Profit Rises; Net Sales Up More Than 15 Percent

]GRAND RAPIDS, Mich. -- Spartan Stores here posted third-quarter net income of $10.6 million or $49 cents per share, vs. $5.9 million, or 27 cents per share, in the same quarter last year. Consolidated net sales for the 16-week third quarter ended Jan. 5 reached a five-year high, increasing 15.6 percent to $826.1 million, from $714.4 million in last year's third quarter. The net sales improvement was due primarily to the acquisition of Felpausch stores, strong comparable-store sales growth of 3.4 percent (excluding fuel center sales), and incremental distribution sales to new and existing customers.

Spartan's third-quarter operating earnings increased 17 percent to $15.6 million, from $13.4 million in the same period last year, an improvement the company said was attributable to continued strong sales growth in both business segments.

"Our third-quarter operating earnings improved more than 17 percent, marking the eighth consecutive quarter of double-digit growth," said Craig C. Sturken, Spartan Stores' chairman/c.e.o. "The third-quarter sales improvement represents our seventh consecutive quarter of sales growth, as we continued to successfully integrate and expand business with new and existing distribution customers, and as we continued to experience positive sales per transaction and customer traffic results at our retail supermarkets."

Third-quarter earnings from continuing operations increased 68.8 percent to $10.5 million, from $6.2 million in the same period last year. As previously disclosed, the company recorded a one-time, noncash income tax charge of $2.7 million in its second quarter, related to the enactment of the Michigan Business Tax, a charge fully reversed in the third quarter as anticipated.

Meanwhile third-quarter retail net sales increased 27 percent to $415 million, from $327 million in the same period last year, an increase due primarily to incremental sales from the acquired Felpausch retail stores and comparable-store sales growth of 3.4 percent (excluding fuel center sales) and 7.2 percent (including fuel center sales). The gains were partially offset, however, by lower sales at Pharm retail stores and comparable in-store pharmacies.

The company said its strong same-store sales growth was the result of continued capital investment, including store remodels and relocation, and the acquired pharmacies.

"The initial investments in our store remodel and relocation programs are generating the overall sales trends and market share results that we were anticipating," noted Sturken, adding that while the relaunch of five stores had a temporary effect on earnings, "we remain optimistic about our performance and expect to benefit from these investments, beginning in the fourth quarter.

"We remain very pleased with our distribution segment's new business trends and continue to expect the addition of more than $120 million in incremental distribution sales during this fiscal year," continued Sturken. "We remain focused on improving our distribution network efficiency and providing even better service levels to our valued customers."

Additionally, "we continue to refine our strategic plan for the acquired Felpausch stores. As a result we now expect to increase capital spending in the current and next fiscal year to create certain market consolidation and other growth opportunities sooner than we originally anticipated. We are scheduled to complete four additional Felpausch store remodels early in fiscal 2009, and expect to complete up to four more remodels and relocations later in fiscal 2009."

In addition to supplying nearly 400 independent grocery stores in Michigan, Indiana, and Ohio, Spartan Stores also owns and operates 88 retail supermarkets and 14 deep-discount food and drug stores in Michigan and Ohio, including Family Fare Supermarkets, Glen's Markets, D&W Fresh Markets, Felpausch Food Centers, and The Pharm.
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