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GRAND RAPIDS, MICH. -- Spartan Stores, Inc.'s consolidated net sales for the 16-week third quarter ended Dec. 30, 2006 increased 12.7 percent to $723 million, from $642 million in the same period last year.
Net sales increased across both of the company's business segments, due primarily to the acquisition of D&W Food Center stores, comparable-store sales growth of 3.2 percent, and new distribution business and pharmacy sales associated with the company's recent purchase of pharmacies located within the acquired D&W stores.
Third-quarter operating earnings increased 59 percent to $13 million, from $8 million in the same period last year, an improvement the company said was driven primarily by sales growth, the D&W acquisition and related synergies, and continued operating efficiencies.
"We are pleased to report another quarter of solid sales growth and significantly higher earnings," said Craig C. Sturken, Spartan Stores' chairman, president, and c.e.o. "Our third-quarter net sales, operating earnings, and net earnings are at their highest levels in many years. We experienced solid sales growth in both our retail supermarket and distribution businesses, despite the unseasonably warm winter weather in our northern Michigan markets and a challenging economic environment."
Earnings from continuing operations for the third quarter were $6.1 million, an increase of 27 percent, compared with $4.8 million in the same period last year, which included net special after-tax benefits of approximately $0.5 million.
Third-quarter net earnings increased 75.6 percent to $5.9 million, or 27 cents per diluted share, from $3.4 million, or 16 cents per diluted share in the year-ago period. The third-quarter net earnings include a $1.4 million increase in interest expense to $3.9 million, from $2.5 million in the corresponding period last year, due to higher outstanding borrowings used to fund the company's acquisitions, as well as interest rate increases.
Consolidated net sales for the 40-week year-to-date period rose 14.1 percent to $1.8 billion, from $1.6 billion in the corresponding period last year, an increase primarily resulting from incremental sales from the D&W acquisition, higher comparable-store sales, incremental sales from new distribution customers, and increased sales to existing customers.
The increase was partially offset by the closing of two retail stores in the first quarter of fiscal 2007, the transitioned distribution business mentioned earlier, and the unseasonably warm winter weather in the company's northern Michigan region during the third quarter.
"Our business strategies are producing solid financial results in spite of the unseasonably warm weather conditions and the softness in the regional economy we serve," said Sturken. "We believe our consumer-focused distribution business model is amplifying our existing customers' financial performance and strengthening their competitive market position. We also believe that our strong value proposition is gaining the attention of a wider audience of prospective customers."
In the retail segment, Sturken said the company's "consumer-centric strategy includes building fuel centers and adding in-store pharmacies, which continue to contribute significantly to our growth. We are moving forward to aggressively integrate and improve the operations at our D&W Fresh Market stores, to bring them up to their performance potential and up to our internal performance standards."
By fiscal year-end, Spartan expects to complete two D&W Fresh Market store remodels and begin a third, while also anticipating the start of construction on a Family Fare prototype replacement store that will include 60 percent more retail square feet. Spartan also plans to "continue prudently seeking available acquisition growth opportunities within its Midwest market," said Sturken.
With warehouse facilities in Grand Rapids and Plymouth, Mich., Spartan Stores supplies over 350 independent grocery stores in Michigan, Indiana, and Ohio. It also owns and operates 68 retail supermarkets and 19 deep-discount food and drug stores in Michigan and Ohio, including Family Fare Supermarkets, Glen's Markets, D&W Fresh Markets, and The Pharm.