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As part of its ongoing distribution network optimization efforts, Spartan Stores, Inc. will consolidate its distribution centers in the company’s Grand Rapids, Mich., home base, which could result in the planned closure of a dry grocery warehouse in Plymouth, Mich., by the end of March and the transfer of 138 union jobs. As a result, the retailer/wholesaler said it would be forced to eliminate roughly 25 administrative positions in a move that officials hold is ultimately aimed at strengthening Spartan’s competitive position while ensuring that it continues to remain a “low-cost supplier in our markets for many years to come.”
The company’s potential closure of the 415,000-square-foot warehouse should be completed by the end of its fiscal 2010 fourth quarter. Company officials said they would launch negotiations with Teamsters Local 337 before a final decision to shutter the Plymouth facility is made. The current union contract expires in April, while the lease to the facility expires in October.
As part of the negotiations, Spartan officials plan to offer employment opportunities for Plymouth Teamster employees at its Grand Rapids distribution center. In conjunction with the warehouse optimization, the company will implement an administrative cost reduction initiative. If the moves are implemented, Spartan expects to incur a fiscal 2010 fourth-quarter charge of about $1.5 million to $2 million.
“This is another important step in our ongoing strategy of continuously improving efficiency and lowering costs in our operations,” said Spartan president and CEO Dennis Eidson. “During the past several years, we have prudently invested capital to upgrade our distribution system technology, expand our produce-ripening operations, upgrade our entire fleet of trucks, and just recently completed a major warehouse re-racking project at our Grand Rapids grocery distribution facility that significantly increased warehouse capacity and improved space utilization.”
Accordingly, Eidson said the investments “have significantly improved our dock scheduling, traffic management, inbound freight and transportation-routing system. The optimization of our distribution facilities and the current economic conditions provided us with an opportunity to restructure certain aspects of our organization,” he added.
Eidson went on to say that, as previously disclosed, “We expected the near-term economic climate in Michigan to continue weakening and pressure our sales and earnings performance as the year progressed. Based on our current view of market trends and Michigan’s nation-leading unemployment rate of nearly 15 percent, these expectations are materializing. The economic climate in Michigan remains challenging due to the persistent high unemployment rate and tightening consumer-spending patterns. In addition, we continue to experience price deflation in some high-volume product categories, pricing pressure in fuel, and heightened competition in certain markets due to new store openings.”
Consequently, Spartan now expects same-store sales to be in the negative mid-single-digit range for the third and fourth quarters vs. its previous expectation of a decline in the low-to-mid-single-digit range, along with a commensurate sales decline in its distribution segment, excluding the elimination effect on distribution sales related to its acquisition of VG’s Food and Pharmacy. Third- and fourth-quarter profits will thus be affected for fiscal 2010.
Spartan Stores serves 350 independent supermarkets and 97 Spartan-owned Family Fare Supermarkets, Glen’s Markets, D&W Fresh Markets, Felpausch Food Centers and VG’s Food and Pharmacy.