SpartanNash Logs Q1 Sales Hike

Bridget Goldschmidt
Managing Editor
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SpartanNash Logs Q1 Sales Hike
Family Fresh is one of SpartanNash's retail banners, which experienced a dramatic comparable-sales increase in Q1 amid the COVID-19 pandemic

Thanks in large part to the coronavirus, SpartanNash Co. reported net sales for its 16-week first quarter ended April 18 of $2.86 billion, a 12.4% increase from the $2.54 billion logged in the year-ago period, representing the company’s 16th consecutive quarter of growth.

SpartanNash’s Q1 retail comparable-store sales of 15.6% were positive for the third straight quarter, a considerable acceleration from recent trends driven by the COVID-19 pandemic. The company’s earnings per share (EPS) for the quarter came to 43 cents, a 105% increase over the prior-year quarter, while its adjusted EPS of 67 cents was a 179% rise from last year. SpartanNash’s adjusted EBITDA grew 35% to $74 million, from $54.7 million in the year-ago period.

As a result, the company has raised its full-year outlook to reflect actual year-to-date results as well as for higher sales and earnings trends the company began to realize before the COVID-19 pandemic began. According to SpartanNash, its Q1 results include an estimated 38 cents of additional EPS from increased consumer demand related to the coronavirus. The company’s updated outlook for the second half of the year doesn’t include any adjustment for future impacts from the pandemic, but SpartanNash said it currently anticipates that any incremental costs related to COVID-19 will be more than offset by the improved food-at-home sales trend.

“I am incredibly proud of our family of associates, from those within our retail stores to our supply chain team, and all of those supporting their efforts to serve our local customers and communities during this significant time of need for food, pharmacy, household and personal care products,” said Dennis Eidson, the company’s interim president and CEO. “Our No. 1 priority continues to be the well-being and safety of our entire team, particularly those on the frontlines, who have been driving our business forward every day. Our ability to respond to unprecedented consumer demand during the quarter enabled us to significantly exceed our expectations for the quarter, and we are raising our annual outlook to reflect our strong first-quarter execution in a challenging and evolving environment. Going forward, we remain committed to enhancing our long-term strategy as we build upon SpartanNash’s existing foundation and increasingly position the company to sustain profitable growth.”

The COVID-19 Effect

The company saw a significant hike in demand across all three of its business segments – food distribution, retail and military -- starting in mid-March, the 11th week of its first fiscal quarter. These increases marked a distinct change in customer behavior in response to the pandemic as volumes rose because retail consumers were stocking up on essentials. This was followed by a change to food at home in relation to state-mandated shutdowns of restaurants and other businesses, as well as stay-at-home orders.

In the food distribution segment, sales comparisons to last year rose 9.5% for the first 10 weeks of the quarter. In the last six weeks of the quarter, sales trended higher than the prior year by 29.7% and ended the quarter ahead of the prior year by 17.1%. In the retail segment, through the first 10 weeks of the quarter, the company’s comps, excluding fuel, were on track to meet its guidance of approximately flat and accelerated to a 42% increase for the quarter’s last six weeks, ending the quarter at 15.6%. In the military segment, sales comparisons to the prior year declined 3.2% for the first 10 weeks of the quarter. In the quarter’s last six weeks, sales trended higher than the prior year by 18.1% and ended the quarter ahead of the prior year by 4.9%.

SpartanNash incurred direct costs related its efforts to support frontline associates, as well as to boost cleaning and sanitation practices at all operating locations. The company’s incremental direct labor costs included weekly appreciation bonuses and an additional $2 an hour for frontline workers. Sanitation costs included further cleaning of high-touch surfaces, fogging of distribution locations, the installation of sneeze guards, and providing masks and gloves to all employees.

The company’s Q1 capital expenditures and IT capitalcame to $19.5 million versus $16 million in the year-ago period.

Additionally, the board of directors is currently engaged in a comprehensive process find SpartanNash’s next CEO, in which the board said it has made progress over the first quarter.

SpartanNash’s core businesses include distributing grocery products to independent and chain retailers, its corporate-owned retail stores, and U.S. military commissaries and exchanges, as well as fresh produce distribution and fresh food processing. No. 40 on The PG 100, Progressive Grocer’s 2020 list of the top food retailers in the United States, the Grand Rapids, Mich.-based company serves customer locations in all 50 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain, Djibouti and Egypt. SpartanNash operates 156 supermarkets, mainly under the banners of Family Fare, Martin’s Super Markets, D&W Fresh Market, VG’s Grocery, and Dan’s Supermarket. Through its MDV military division, the company distributes grocery products to U.S. military commissaries.

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