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Spartan Stores, Inc. yesterday reported consolidated net sales of $577.2 million for its 12-week first quarter ended June 19, a 3.2 percent drop from the same period last year, while net profits slid 12.7 percent to $5.99 million.
The company attributed the decline in net sales to lower retail and distribution sales driven by the prevailing economic and competitive conditions, retail price deflation, and previously sold or closed stores, partially offset by higher fuel sales and new store openings.
“Despite the continued economic and market challenges, our earnings were better than expected, and we were able to achieve adjusted EBITDA that is among our highest first-quarter levels,” said Dennis Eidson, Spartan president and CEO. “While consumer purchasing behavior seems to be stabilizing, consumers remain conservative relative to spending. This factor, along with continued retail price deflation, is causing us to remain cautious in the near term. During this uncertain economic period, we remain steadfast in our commitment to further improve operating efficiency and our value proposition with consumers.”
Adjusted EBITDA for the quarter was $23 million, or 4 percent of net sales, compared with $24.9 million, or 4.2 percent of net sales, in the same period last year.
Operating expenses totaled $113.3 million, or 19.6 percent of sales, compared with $115.9 million, or 19.5 percent of sales in the year-ago quarter. As a percentage of sales, the increase in operating expenses was due primarily to a first-quarter $2.6 million pretax provision for asset impairment and exit costs related to the warehouse consolidation initiative and an individual store impairment charge.
Retail segment net sales in the first quarter were $332 million, compared with $342.7 million in the same period last year. The sales decline was due primarily to lower comparable-store sales and the loss of $6.4 million in sales related to the four stores that were closed or sold since last year’s first quarter. The segment-sales decline was partially offset by an increase in the number of fuel centers in operation, a higher average retail fuel price per gallon sold, one new D&W Fresh Market store that opened mid-quarter and a replacement store that opened in last year’s third quarter. Comps sales for the quarter, excluding fuel centers, declined 6.1 percent as a result of the current economic conditions, competitive market activity and retail price deflation.
“We expect to continue generating strong cash flow, while strengthening our balance sheet and further improving operating efficiency and our consumer value proposition during the fiscal year,” Eidson said. “The near-term economic and market conditions are likely to remain challenging as we progress through this period of heightened economic uncertainty and fragile consumer confidence .… We expect retail comparable-store sales to improve on a sequential-quarter basis during the remainder of the fiscal year.”
Grand Rapids, Mich.-based Spartan distributes more than 40,000 private label and national-brand products to 365 independent grocery stores in Michigan, Indiana and Ohio. Spartan also owns and operates 97 retail supermarkets in Michigan, including Family Fare Supermarkets, Glen’s Markets, D&W Fresh Markets, Felpausch Food Centers and VG’s Food and Pharmacy.