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SpartanNash Q2 Success Reflects Merger 'Synergy'

SpartanNash Co.'s consolidated net sales for the second quarter ending July 12 increased 178 percent to $1.8 billion, compared to $651.1 million last year, primarily due to $1.2 billion in sales generated as a result of last November's merger of Spartan Stores with Nash Finch Co.

Reported operating earnings increased 115.3 percent to $32.6 million, compared to $15.2 million for the prior year quarter, primarily due to contributions from the merger with Nash Finch. These benefits were partially offset by the impact of low inflation, increased integration, restructuring and asset impairment charges, additional LIFO expense and a pension settlement accounting charge.

“We are pleased to have exceeded our adjusted earnings guidance for the second quarter,” said Dennis Eidson, SpartanNash president and CEO. “The earnings upside was driven primarily by continued favorable synergy realization and our retail segment. While the quarter started off slowly due to the later timing of Easter, sales trends improved as the quarter progressed and the retail division achieved positive comparable store sales over the back half of the second quarter despite some softening in the consumer environment. We have also made significant progress with our merger integration efforts and remain committed to providing excellent service and value to all of our retail, food distribution and military customers.”

Running the Numbers

Adjusted earnings from continuing operations for the second quarter were $19.1 million, or 50 cents per diluted share, compared to $10.2 million, or 46 cents per diluted share last year. Gross profit margin for Q2 was 14.7 percent compared to 20.5 percent in the prior year. The change in gross profit margin rate primarily reflects the change in the segment mix of operations due to the merger and the impact of continued low inflation.

Net sales for the food distribution segment increased 182.4 percent to $767.9 million in Q2 from $271.9 million for the year-ago period. The increase in sales was due to $501.4 million in sales from Nash Finch, partially offset by the negative effect of the change in timing of the Easter holiday and the reduction in the Supplemental Nutrition Assistance Program (SNAP).

Net sales for the retail segment increased 42.4 percent to $539.8 million in Q2, from $379.2 million a year ago, primarily due to $184.9 million in sales generated as a result of the merger and new and remodeled stores. Comparable store sales, excluding fuel, were flat to the prior year, primarily due to the later timing of Easter, which adversely affected the results by approximately 80 basis points and the impact of the cutbacks in SNAP benefits. In addition, retail sales reflect $17.1 million in fewer sales due to the store closures.

During the second quarter, the company completed three major remodels and began construction on two new stores. Additionally, two supermarkets were sold to distribution customers and one underperforming supermarket was closed. SpartanNash ended the quarter with 166 corporate-owned stores and 30 fuel centers.

Net sales for the company’s military segment were $502.4 million and operating earnings were $6.7 million for the second quarter of fiscal 2014.

Grand Rapids, Mich.-based SpartanNash Co.'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, the Azores, Bahrain and Egypt. SpartanNash operates 166 supermarkets, primarily under the banners of Family Fare Supermarkets, D&W Fresh Markets, Family Fresh, No Frills, Bag 'n Save, Sun Mart and Econofoods.

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