SpartanNash Earnings Up, Sales Flat in Q1

SpartanNash Co. enjoyed a 10-percent boost in earnings but saw net sales slip slightly during the first quarter of its 2015 fiscal year.

Adjusted earnings per share for continuing operations for the Grand Rapids, Mich.-based food distributor rose to 44 cents per diluted share for the quarter ending April 25. The company saw an operating cash hike of 50 percent to $48.9 million, while long-term debt dropped by $35 million. 

Meanwhile, Q1 consolidated net sales decreased 0.9 percent to $2.31 billion compared to $2.33 billion last year as increases in the food distribution and military segments were offset by the impact of the company's store rationalization plan and significantly lower retail fuel prices compared to the prior year.

"We are encouraged by our performance in the first quarter," said Dennis Eidson, SpartanNash's president and CEO. "As expected, our sales comparisons were negatively affected by the significant winter weather benefit in the first quarter last year and inclusion of the stores acquired in the merger with Nash Finch. Despite these headwinds, we achieved slightly positive comparable store sales in our Michigan supermarkets and our adjusted earnings from continuing operations exceeded our expectations as we benefited from lower expense levels and merger synergies."

Eidsen also noted SpartanNash's expanding retail presence, most recently through the acquisition of  Dan's Supermarket Inc., a six-store chain serving Bismarck and Mandan, N.D. "This acquisition offers us a great opportunity to serve additional customers in North Dakota and incorporate a successful independent business into our family of corporate-owned stores," he said of the deal, expected to close June.

Food Distribution Segment

Net sales for the food distribution segment increased 1.6 percent to $986.4 million in Q1 from $971 million a year ago. Q1 adjusted operating earnings for the segment were $22.2 million, compared to $19.1 million last year. 

Retail Segment

Q1 net sales for the retail segment decreased 7.6 percent to $626.9 million from $678.6 million a year ago, primarily due to $27.8 million in lower sales due to the closure of retail stores and fuel centers, $15.8 million due to significantly lower retail fuel prices and a 1.2 percent decrease in comparable store sales, excluding fuel. "As anticipated, comparable store sales reflect the inclusion of the stores obtained in the merger with Nash Finch, the significant winter weather benefit in the first quarter last year and limited center store inflation," the company reported. "Comparable store sales in the company's core Michigan supermarkets were slightly positive in the first quarter."

During Q1, SpartanNash opened one new store and fuel center and closed four stores, ending the quarter with 159 corporate-owned stores and 30 fuel centers.

Military Segment

Net sales for the company's military segment increased 2.2 percent to $699.4 million compared to $684.2 million in the prior year's Q1, primarily due to increased export sales and new business. Reported operating earnings for the military segment were $6.2 million, compared to $4.4 million in the prior year quarter. The increase in operating earnings was due primarily to increased sales volumes, improved operational efficiencies and lower net fuel costs.

"We are cautiously optimistic about the outlook for the remainder of the year given the continued limited center store inflation and an increasingly competitive retail food environment, particularly in our western markets," Eidson said. "While we expect modest pressure on sales, we continue to take steps to drive our top and bottom line, including the rollout of our merchandising, pricing and promotional strategies across our western store base and additional store remodels. During the first quarter, we began construction on six remodels and re-banners in the Nebraska market and expect to realize the impacts of this investment upon completion of these projects in the third quarter. We also expect to continue to benefit from the merger integration and improved operational efficiencies, including the optimization of our supply chain in our food distribution and military channels."

For Q2, the company anticipates that net earnings from continuing operations per diluted share will slightly exceed last year's comparable Q2 results of 50 cents per diluted share, excluding merger integration costs and any other one-time expenses.

SpartanNash's core businesses include distributing food to military commissaries and exchanges and independent and corporate-owned retail stores located in 44 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain, Honduras and Egypt. SpartanNash currently operates 159 supermarkets, primarily under the banners of Family Fare Supermarkets, D&W Fresh Markets, Family Fresh, No Frills, Bag 'n Save, Sun Mart and Econofoods.