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SpartanNash Co.’s overall net sales rose nearly 2 percent for the second quarter of its 2016 fiscal year, ending July 16, with mixed results in its operating divisions.
Consolidated net sales for the 12-week second quarter increased to $1.83 billion from $1.80 billion over the prior, driven by increases in the food distribution and military segments for the Grand Rapids, Mich.-based grocery operator.
Net sales for SpartanNash’s food distribution segment increased to $820.3 million from $782.7 million in the prior year quarter, primarily due to new business gains and growth of existing accounts.
Meanwhile, Q2 net sales for the retail segment were $501.8 million, compared to $516.1 million for the year-ago quarter. The company attributed this to a 3 percent decrease in comparable store sales, excluding fuel; $9.8 million in lower sales resulting from the closure of retail stores and fuel centers; and $4.1 million due to lower retail fuel prices compared to the prior year; partially offset by contributions from stores acquired in the second quarter of last year.
SpartanNash chalks this up to “the continued challenging economic conditions in select geographies, retail price deflation and competitive store openings, particularly in the company’s western region.”
Operational and Strategic Progress
“We are generally pleased with our execution in the second quarter and the progress we have made operationally and strategically, particularly our ability to grow sales in a challenging operating environment,” said Dennis Eidson, SpartanNash's president and CEO. “New business growth and operational efficiencies helped mitigate the impact of deflation on our bottom line. We are also encouraged by our diverse pipeline of sales opportunities and remain on track to achieve our financial objectives for the year.”
Adjusted Q2 earnings per share from continuing operations rose 9 percent to 58 cents per diluted share.
Eidson added: “We continue to take steps to position the company for growth by enhancing our merchandising, pricing and promotional strategies to drive greater customer engagement and improve the overall shopping experience; expanding our organic and private brand product offerings to provide our customers with quality products at affordable prices; investing in select retail markets; and improving operations and expense leverage through our supply chain optimization and merger integration efforts.”
Net sales for the company's military segment increased to $505.4 million from $497 million in the prior-year quarter. The increase was primarily due to new business gains associated with the distribution of fresh products, partially offset by continued lower sales at the Defense Commissary Agency (DeCA) operated commissaries.
“With current market headwinds and economic conditions likely to persist, particularly in our western geographic areas, we remain focused on operating our business with a disciplined approach,” Eidson said. “We will continue to implement our initiatives to enhance our merchandising, pricing and promotional strategies, including expanding our organic and private brand product offerings, improving our produce offering, and driving greater customer engagement through our loyalty program.”
Eidson said the company is “excited about the initial rollout of Open Acres, our new private brand for fresh products, as this will provide our consumers in both company-owned and independent store locations with quality fresh products at a significant savings.”
Additionally, SpartanNash recently completed eight remodels and rebanners to Family Fare in Omaha, Neb.,” improving our offering to the customer while highlighting our variety and value, especially as it relates to produce and private brand, and have been encouraged by the initial customer response,” Eidson said.
Based on the first half results and outlook for the remainder of the year, the company is maintaining its previously issued fiscal 2016 guidance of adjusted earnings per diluted share from continuing operations of $2.07 to $2.18, excluding merger integration costs and other adjusted charges and gains, compared to $1.98 in the prior year.
SpartanNash's core businesses include distributing grocery products to military commissaries and exchanges, and independent and company-owned retail stores located in 47 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain and Egypt. SpartanNash operates 160 supermarkets, primarily under the banners of Family Fare Supermarkets, Family Fresh Markets, D&W Fresh Markets and Sun Mart.