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Spartan Stores Inc. reported consolidated net sales for the first quarter of its 2012 fiscal year of $602.6 million, an increase of 4.4 percent compared to $577.2 million in the same period last year, with both distribution and retail segments reporting improved performance.
“We are pleased that our first quarter fiscal 2012 financial performance was in line with our expectations,” said Dennis Eidson, Spartan’s president and CEO. “We achieved year-over-year sales growth for the third consecutive quarter in our distribution segment while continuing to enhance our value proposition to the consumer and tightly managing the controllable aspects of our business which resulted in improved profitability in our retail segment.”
First quarter operating earnings increased 4.9 percent to $14 million compared to $13.3 million in the year-ago period. Earnings from continuing operations were $6.1 million, which was comparable to the prior year. Net earnings for the first quarter of 2012 were $6 million, compared to $6 million last year.
Q1 gross profit margin decreased 110 basis points to 20.8 percent from 21.9 percent in the same period last year. The decline was due to a higher mix of fuel and distribution sales in this year’s first quarter compared to the prior year, a LIFO charge of $700,000 this year versus a credit of $1.8 million in the prior year due to the warehouse consolidation, as well as a lower rate of procurement related gains.
Operating expenses totaled $111.3 million, or 18.5 percent of net sales, compared to $113.3 million, or 19.6 percent of sales in the year-ago quarter.
First quarter net sales for the distribution segment increased 4.8 percent to $257.1 million from $245.3 million in the year-ago period due to new customers, improvement in pharmacy related sales and increased sales to existing customers. Operating earnings for the segment decreased 7.3 percent to $7.4 million, compared to $8.0 million in the same period last year.
Q1 net sales for the retail segment increased 4.1 percent to $345.4 million, compared to $332 million in the same period last year. The higher sales were due primarily to increased fuel retail selling prices and volume, partially offset by a decline in comparable store sales, excluding fuel, of 0.9 percent.
Retail segment operating earnings for the quarter increased 23 percent to $6.6 million, compared to $5.4 million in the year-ago period. The increase in operating earnings was attributed to lower health care expenses and benefits from cost containment initiatives, partially offset by increased debit/credit card fees.
“The Michigan economy has shown some improvement from its previous lows to a more stable level,” Eidson said. “However, this improvement has been mitigated by higher fuel prices which impacted consumers’ discretionary income and an uptick in the unemployment rate over the last two periods of the quarter. Looking forward, we continue to expect comparable store sales to turn positive in the second half of the year as we benefit from cycling fiscal 2011’s competitive store activity, we continue to execute our capital investment program, we rollout our loyalty program across the remaining banners and the economy continues to experience inflation. As a result, we remain cautiously optimistic about our operating outlook and expect continued improvement of our key financial metrics in fiscal 2012.”
The company expects that the second quarter distribution sales growth and retail comparable store sales rate, excluding fuel, will be comparable to the first quarter of fiscal 2012. The company expects fiscal 2012 second quarter adjusted net earnings to approximate last year’s adjusted performance.
Grand Rapids, Mich.-based Spartan Stores Inc. distributes more than 40,000 corporate and national brand products to approximately 375 independent grocery stores in Michigan, Indiana and Ohio, and to 97 corporate owned stores located in Michigan, including D&W Fresh Markets, Family Fare Supermarkets, Glen’s Markets and VG’s Food and Pharmacy.