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GRAND RAPIDS, Mich - Quarterly profits for Spartan Stores Inc. here more than doubled, helped by sales growth in its retail segment. The company posted first-quarter earnings of $6.5 million, or 30 cents a share, compared with $2.7 million, or 12 cents a share, in the year-ago period.
Net sales for the 12-week first quarter rose 5.4 percent to $556.7 million from $528 million in last year's first quarter. Contributing to the net sales growth were 3.6 percent comparable store sales growth (excluding fuel sales) in the company's retail segment, incremental fuel sales and distribution segment sales growth from the addition of new customers and higher sales to existing customers.
Operating earnings improved for the sixth consecutive quarter, increasing 87.4 percent to $12.8 million from $6.9 million in the same period last year. Last year's operating earnings included a $4.5 million charge for asset impairment and exit costs associated with the closing of two retail stores and a central bakery operation, and $1.1 million of start-up costs associated with the D&W acquisition, compared with $0.5 million of start-up costs associated with the Felpausch acquisition in this year's first quarter. The operating earnings improvement was due primarily to the absence of the above-mentioned charges, higher net sales and better leveraging of expenses, Spartan said.
"We are certainly pleased with our business plan execution and steady sales and profit growth," said Craig C. Sturken, Spartan's chairman, president and c.e.o. "Year-over-year quarterly net sales have grown steadily for the past five quarters and operating earnings have again improved by double digits in this quarter, despite a difficult economic environment."
First-quarter earnings from continuing operations increased 158.2 percent, reaching $6.8 million, or $0.31 per share, compared with $2.6 million, or $0.12 in the same period last year. Earnings from continuing operations for the quarter also benefited from reduced interest expense due to lower average outstanding borrowings, the amendment to the company's revolving credit facility and its successful private placement of convertible senior notes.
Net earnings for the quarter increased 142.3 percent to $6.5 million, or $0.30 per share, from $2.7 million, or $0.12 in the same period last year.
First-quarter gross profit margins declined 30 basis points to 19.3 percent from 19.6 percent in the same period last year. The rate decline was due primarily to an increase in the mix of lower gross margin fuel and pharmacy product sales.
Operating expenses declined to $94.9 million, or 17.0 percent of sales, compared with $96.6 million, or 18.3 percent of sales, in the year-ago quarter. As a percentage of sales, the decline was due to the absence of the previously mentioned charges in this year's first quarter, improved store labor efficiency and better fixed cost leverage.
"We remain pleased with the continuing progress of the growth phase and other elements of our business plan, said Sturken, noting that during the first quarter, "we began transitioning the new distribution business with Martin's Super Markets and the integration of our Felpausch acquisition. In addition, we completed one major store remodel and will complete two substantial remodels in our D&W stores early in our second quarter. We also opened one new fuel center."
During the remainder of the year, Spartan will continue working "to fully transition the new distribution business with Martin's Super Markets and to integrate our Felpausch acquisition," said Sturken.