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    Spartan Q2 Sales Down 1.3%

    Michigan grocer reduces long-term debt by $37 million

    Retailer and distributor Spartan Stores Inc. reported second-quarter 2010 consolidated net sales of $602.1 million, compared to $610.2 million for the same period last year, a drop the company chalks up to economic and competitive conditions.

    “Data suggests that the Michigan economy appears to have stabilized, giving us somewhat more confidence than this time last year,” said Dennis Eidson, Spartan’s president and CEO. “However, the consumer remains cautious and the competitive environment is still challenging.”

    Second-quarter operating earnings were $22.1 million, compared with $21 million in the year-ago period. “We continue to be encouraged by the improvement in our business trends,” Eidson said. “As anticipated, our trend in retail comparable store sales has improved on a sequential basis for the past two quarters. In addition, our second-quarter operating earnings are one of the highest second-quarter levels that we have reported in the past five years and, year-to-date, we generated more than $45 million in net cash from operations.”

    Retail segment net sales were $353.5 million, compared to $360.2 million last year. The decline was due primarily to lower comparable store sales and the loss of $5.8 million in sales related to the three 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 and benefits from the company’s capital investment program.

    Comparable store sales for the quarter, excluding fuel centers, declined 4.7 percent, which represented a 1.4 percent improvement over the prior quarter’s results.

    Operating expenses totaled $113.1 million, or 18.8 percent of sales, compared with $115 million, or 18.8 percent of sales, in the year-ago quarter. Distribution segment net sales for the second quarter of $248.6 million were comparable to the year-ago period.

    “In retail, we completed a remodel project during the second quarter, converting a store to a Family Fare,” Eidson said. “The store was reopened late in the second quarter, and we are quite pleased with the initial customer acceptance. We are continuing to gain even more valuable knowledge about consumer purchasing and preferences through our loyalty card program. Our fuel center business strategy continues to perform well, as it materially adds to our overall consumer value proposition.

    “Data suggests that the Michigan economy appears to have stabilized, giving us somewhat more confidence than this time last year; however, the consumer remains cautious and the competitive environment is still challenging. We made many enhancements to our business operations during the past several years that have allowed us to sustain profitability in a slower growth economic climate, and we expect to realize additional benefits from these changes when the economy returns to a more normal growth rate.”
    Eidson said Spartan plans to introduce more than 200 new private brand products during the second half of the fiscal year, about half of them in center store and the rest in fresh product categories under the new “Fresh Selection” brand.

    “During the remainder of the fiscal year, we expect retail comparable store sales to improve relative to the second-quarter results, with a modest improvement in the third quarter,” he said. “From an earnings perspective, we anticipate that third-quarter net earnings will approximate or slightly exceed last year’s performance and that fiscal 2011’s full-year performance will approximate or slightly exceed fiscal 2010’s.”

    Grand Rapids, Mich.-based Spartan Stores Inc. distributes more than 40,000 corporate and national brand products to approximately 370 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.

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