Consolidated net sales were up in the fourth quarter and full year at SpartanNash Co., with gains in its distribution and military segments offsetting declines in a persistently deflationary retail sector.
Q4 net sales increased to $1.83 billion from $1.77 billion in the prior-year quarter, while sales for the fiscal year ending Dec. 31, 2016, rose $82.6 million to $7.73 billion, from $7.65 billion in fiscal 2015.
“Our fourth-quarter performance was a strong finish to an equally strong fiscal 2016 as we continued to grow sales and exceed our earnings guidance despite a continued challenging deflationary environment,” said Dennis Eidson, SpartanNash's CEO and chairman. “Our results reflect the sound execution of our strategy to leverage our supply chain network in order to drive new and expanded customer supply business.”
Q4 operating earnings were $24.6 million, compared with $33 million in the prior-year quarter. Earnings from continuing operations were $12.8 million, or 34 cents per diluted share, compared with $17.2 million, or 46 cents per diluted share, a year ago. Operating expenses were $234.6 million, or 12.8 percent of sales.
For the year, earnings from continuing operations for fiscal 2016 were $57.1 million, or $1.52 per diluted share, compared with $63.2 million, or $1.67 per diluted share, last year.
Food Distribution Segment
Q4 net sales increased to $838.6 million from $773.7 million last year, primarily due to business gains from new and existing customers, as well as holiday timing, which more than offset the negative impact of deflation. Reported operating earnings for the food distribution segment were $21.1 million, compared with $22.6 million in the prior-year quarter.
Net sales in Q4 increased to $510.4 million from $504.7 million in the prior-year quarter. The increase was due to new business gains associated with the distribution of fresh products and holiday timing, partly offset by lower sales at Defense Commissary Agency (DeCA)-operated commissaries. Operating earnings were $3.4 million, compared to $3.6 million in the prior-year quarter.
Q4 net sales were $479.2 million, compared with $489.6 million a year ago. Comparable-store sales, excluding fuel, improved to -1.2 percent from -1.8 percent a quarter ago, as a 50-basis-point impact resulting from the holiday shift helped mitigate the impact of ongoing deflation and continued challenging economic conditions, particularly in North Dakota.
The decrease in net sales was primarily attributable to $7.7 million in lower sales resulting from retail store closures and the negative comps, partly offset by a $2.4 million increase in sales due to higher retail fuel prices and gallons sold compared with the prior year.
Reported operating earnings in the retail segment were $0.2 million, compared with $6.8 million in the prior-year quarter.
“As we look forward to 2017 and beyond, we believe we are well positioned to continue to leverage our strong business model, distribution network and balance sheet to grow sales and earnings,” Eidson said. “With Caito’s Fresh Kitchen facility commencing production in the first half of fiscal 2017, we are optimistic about the opportunities to offer fresh protein-based foods and prepared meals to our customers. In our military segment, we are excited to be competitively awarded by DeCA in its new initiative to offer private-brand products in its commissaries. While we expect the deflationary environment to continue through the first half of the year, we remain confident in our overall strategy and believe our focus on providing value and innovative solutions to our food distribution and retail customers will continue to serve our business well.”
For fiscal 2017, the company expects to see growth in year-over-year sales in the food distribution segment, continued challenges with sales at DeCA impacting the military segment, and slightly negative to flat comparable-retail-store sales, which should improve throughout the course of the year.
Grand Rapids, Mich.-based SpartanNash’s core businesses encompass distributing grocery products to independent grocery retailers, national accounts, its corporate owned retail stores, and U.S. military commissaries. The company serves customer locations in 47 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain, and Egypt. SpartanNash currently operates 155 supermarkets, primarily under the Family Fare Supermarkets, VG’s Food and Pharmacy, D&W Fresh Market, Sun Mart, and Family Fresh Market banners.