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GRAND RAPIDS, Mich. - Buoyed by the acquisition of Felpausch Food Centers, strong same store sales, and new and incremental distribution sales to Martin's Super Markets, Spartan Stores Inc. here said consolidated second quarter net sales reached a six-year high.
During the 12-week earnings period ended Sept. 15, 2007, Spartan's net sales increased 13.5 percent to $627 million from $553 million during the same period last year, while operating earnings -- which increased for the seventh consecutive quarter -- improved 12 percent to $20 million from $18 million in the same period last year, the grocer said.
Craig C. Sturken, Spartan Stores' chairman, president and c.e.o., said: "As we successfully execute the growth phase of our business strategy, we are capitalizing on market opportunities in both business segments that are producing the consistent sales and profit growth that we were anticipating."
Spartan reported that its strong sales growth and efficient operating cost structure led to a near 12 percent year-over-year increase in second quarter earnings.
Second-quarter earnings from continuing operations (before a non-cash charge related to a recent change in Michigan state tax legislation) increased 20 percent to $11.5 million from $9.6 million in the same period last year, due largely to lower interest expenses relating to the private placement of convertible senior notes and the amendment to its revolving credit facility during the first quarter.
Sales in Spartan's distribution segment increased 4.4 percent to $294 million from $281 million in the same period last year, due primarily to incremental business with Martin's Super Markets and an increase in sales to existing customers particularly as a result of a retail competitor exiting the southeastern Michigan market.
The distribution sales increase was partially offset by the elimination of $23.2 million in distribution sales to the acquired Felpausch stores and the termination of two distribution customer relationships during the fiscal 2007 third quarter. Sales to the two customers totaled $3.4 million in last year's second quarter.
Meanwhile, Spartan's second-quarter retail sales increased 23 percent to $333 million from $271 million in the same period last year, primarily as a result of incremental sales from the acquired Felpausch retail stores and strong comparable store sales growth of 5 percent (including fuel sales).
The company cited continued capital investments, including store remodels, the opening of additional fuel centers and the PrairieStone Pharmacy acquisition as playing a strong hand in its strong comp sales growth. Fuel center sales also contributed approximately 2.3 percentage points toward the total comparable store sales increase.
Sales for the 24-week, year-to-date period rose nearly 10 percent to $1.2 billion from $1.1 billion in the corresponding period last year, primarily as a result of the Felpausch retail acquisition, higher comparable store sales, fuel center sales growth, and additional sales from new and existing distribution customers.
"Our year-to-date performance has been better than anticipated, and we remain confident about our performance during the remainder of the fiscal year," said Sturken. He said the company's distribution relationship with Martin's Super Markets "is progressing very well, and we continue to expand business with our distribution customers in southeastern Michigan. We are on track to add more than $120 million in incremental distribution sales during this fiscal year as a result of our efforts. In addition, we are continuing to implement distribution network efficiency improvement initiatives that we expect to produce benefits by late in the fourth quarter."
Sturken said sales performance of three recently remodeled D&W retail stores has also exceeded initial expectations. "The D&W retail stores are developing into a premier consumer shopping destination in our markets and are surpassing our sales growth expectations."
Spartan expects to complete two Felpausch store remodels during the third quarter and is scheduled to complete three additional remodels during the fourth quarter.
Sturken said the company continues to expect same store sales to increase in the low single digits during the second half of fiscal 2008, and the Felpausch stores to add approximately $85 million in consolidated sales during the fiscal year.