You are here
GRAND RAPIDS, Mich. -- Spartan Stores here posted lower net profit and sales for the fourth quarter, which it said was due in part to the timing of Easter, which fell in fiscal 2007 this year.
The company reported profits of $5.3 million, or $0.25 per share, compared to $5.8 million, or $0.28 per share, in the prior year ago period.
Income from continuing operations for the quarter was $5.7 million, or $0.27 per share, vs. $5.3 million, or $0.25 per share in the corresponding quarter last year. Fourth-quarter earnings included a net benefit of $1.4 million due to a favorable LIFO inventory provision, favorable workers' compensation and health care reserve adjustments, and a favorable vendor contract settlement. Better store labor productivity and lower interest expense also contributed to the fourth-quarter earnings improvement.
Sales in the quarter fell 1.1 percent to $452.8 million compared to $457.6 million in the year-ago period. Spartan said the sales decrease was due primarily to the shift in the Easter holiday sales to fiscal 2007 (approximately $6.0 million), two closed Pharm retail stores (approximately $3.1 million), market competition and the influence of higher energy costs on consumer spending. The sales decline was partially offset by higher distribution segment sales from new and existing customers and higher fuel center sales.
Net profit in the fiscal quarter was $5.3 million, or 25 cents per share, compared with a profit of $5.8 million, or 28 cents per share, a year earlier. Results included a 2-cent per share loss from discontinued operations.
"We are very pleased to have achieved our highest level of fourth-quarter earnings from continuing operations in five years and a substantial improvement in both retail and distribution operating earnings," said Craig C. Sturken, Spartan Stores' chairman, president and c.e.o. "We achieved these solid profit results despite an intensely competitive retail environment, the shift in Easter holiday sales to fiscal 2007 and this being our seasonally lowest volume quarter."
Anticipating same-store sales at its retail operations to increase in the low single digits in fiscal 2007, Spartan said it expects capital expenditures to range between $30 million and $35 million in the next year.
Excluding restructuring and start-up costs, fiscal 2007 earnings would improve with operational efficiencies and with the sale of more higher margin items. Further, the company said it expects higher selling, general and administrative costs.
"Placing a strong emphasis on our private label program has yielded an outstanding and sought after portfolio of private label products," said Sturken, noting that Spartan's private label program initiatives helped to improve private label sales penetration during fiscal 2006.
Sturken also said that the majority of Spartan's retail stores have been remodeled, expanded, or have had merchandise resets during the past several years. "Our retail grocery store base is in excellent condition and, except for our recently acquired stores, will require lower capital expenditures to maintain their fresh appearance," said Sturken. "We have an excellent portfolio of retail store franchises and continue to hold the number one conventional retail grocery market share position in most of our core markets."
Commenting on "promising growth opportunities" resulting from Spartan's recently concluded acquisition of D&W Food Centers, Sturken said the transaction, "significantly strengthened our retail market position and provides opportunities to improve our retail sales growth and operating efficiencies. Consumers in markets where these stores are located will enjoy the benefits of our private label products as they have been reintroduced to these stores. They will also enjoy more convenient services at select store locations, including Starbuck's coffee bars, retail banking, Sushi bars, dry cleaning, and expanded wine selections.
"We are in the process of integrating the acquired stores into our operations and are monitoring the effect of the acquired stores on the markets we serve and on the sales performance of our existing stores," Sturken said. As a result, Spartan is considering additional market restructuring alternatives and moving our central bakery operation back into our Family Fare retail operations. "Should we move forward with these plans, an after-tax restructuring charge of up to $3.0 million would be recorded in the fiscal 2007 first quarter," he noted.
Spartan Stores distributes more than 40,000 private-label and national brand products to over 350 independent grocery stores in Michigan. Spartan also owns and operates 70 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.