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SpartanNash reported net sales of $2.28 billion in the first quarter of fiscal 2016, down from $2.31 billion last year, as food distribution increases were offset by lower sales in the military and retail segments.
Higher restructuring charges resulted in operating earnings of $21.7 million compared to $23.9 million last year even as efficiency initiatives and productivity lowered expenses.
Adjusted EBITDA increased to $68 million or 3 percent of net sales, up from $65.9 (2.8 percent) last year. Earnings from continuing operations in the first quarter were $10 million compared to last year’s $10.4 million. Gross profit margin for the first quarter improved to 14.7 percent, up from 14.5 in the prior year.
“Our performance in the first quarter demonstrated our team's continued progress driving new business and achieving meaningful operational efficiencies and merger synergies,” said Dennis Eidson, SpartanNash's president and CEO. He cited the continued growth of the independent customer base and diverse sales opportunities as positive prospects for the future.
During an investor call, Eidson said: "We were generally pleased with our first quarter adjusted results," including adjusted earnings per diluted share of $0.54 that "were in line with our expectations, especially considering the challenging operating environment. Our strong performance demonstrated SpartanNash's disciplined focus on our key strategic initiatives relating to driving new business, improving operational efficiencies and maximizing on our merger synergies."
In addition to securing new independent customers, Eidson also told investors the company is also encouraged by "the drivers we're gaining on our merchandising and marketing programs both for our food distribution customers and our retail stores."
For the remainder of the year, the Grand Rapids, Mich.-based wholesaler will continue to focus on the western retail operations and launch the Family Fare brand in Omaha. In the second quarter, SpartanNash will consolidate its Statesboro, Ga., facility following the successful consolidation of a warehouse in Indiana in the first quarter.
The first quarter results lead the company to maintain its previously issued fiscal 2016 guidance of adjusted earnings per diluted share from continuing operations of about $2.07 to $2.18, excluding merger integration costs and other adjusted charges and gains. This is based on expected sales growth in food distribution and slightly lower comparable retail store sales due to deflation and competition.
Food Distribution Segment
Net sales for the food distribution segment accounted for $991.1 million in the first quarter, up from $986.4 million last year. Operating earnings were up from $20.2 million last year to $25.9 million for this year’s first quarter due to merger synergies, supply chain optimization that resulted in lower operating costs, lower depreciation expense and increased sales. Adjusted operating earnings for the first quarter were $28.8 million, up from $22.2 million last year.
Net sales for the retail segment were down, accounting for $613.1 million compared to last year’s $626.9 million. The decline was primarily attributed to a 3.4 percent decrease in comparable store sales, excluding fuel; a loss of $14 million in sales due to retail and fuel center closures; and $6.2 million because of lower retail fuel prices compared to last year.
Net sales for the military segment were $674.5 million compared to $699.4 million last year. The decline was due to lower sales at the Defense Commissary Agency operated commissaries and unusually strong sales in the first quarter of 2015. Operating earnings were $3.4 million compared to $6.2 million last year because of lower sales, lack of inflationary gains, a change in business mix and the strong results in the first quarter of fiscal 2015.