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Fiscal 2013 third-quarter consolidated net sales dropped just under 1 percent for Spartan Stores Inc., with success mixed during the period for its distribution and retail operations.
Overall net sales for the 16-week Q3 were $789.9 million compared to $797.2 million in the same period last year as a result of lower distribution and supermarket sales, partially offset by increased fuel sales. Adjusted Q3 earnings from continuing operations were $5.2 million, or 24 cents per diluted share.
“Despite ongoing macroeconomic challenges, we made continued progress in the execution of our key strategic priorities during the third quarter,” said Dennis Eidson, Spartan’s president and CEO. “We continued to invest in both our distribution and retail segments by opening new stores, remodeling existing stores, refining our promotional efforts and strengthening our private brand offerings.”
Spartan acquired an upscale, high-volume grocery store in West Michigan, Eidson said, “further solidifying our leading conventional supermarket share in this market.” The company recently announced an expansion of its distribution customer base in Ohio. In addition, Spartan successfully refinanced a portion of its convertible senior notes, “which enabled us to lengthen the maturity of our debt obligations and reduce our overall interest expense,” Eidson said.
Q3 gross profit margin was 20.4 percent for both 2013 and 2012. Third quarter operating expenses, excluding restructuring, asset impairment and other gains or losses, were $149.1 million, or 18.9 percent of net sales, compared to $150.5 million, or 18.9 percent of net sales in the same quarter last year.
Net sales for Spartan’s distribution segment were $346.1 million in Q3 compared to $353.8 million in the same period last year. Q3 net sales for the retail segment were $443.8 million compared to $443.5 million in the same period last year. Spartan credited the slight increase in sales to increased fuel retail selling prices and increased fuel volume, partially offset by a decline in comparable store sales, excluding fuel, of 1.2 percent. “Comparable store sales were negatively impacted by minimal inflation, a calendar shift due to the 53rd week in fiscal 2012 and the change in mix of pharmacy sales away from branded medications to generics,” the company reported.
During Q3, Spartan remodeled two stores, opened two Valu Land stores and acquired one store and one fuel center, ending the quarter with 100 stores and 30 fuel centers. The Company plans to open one new Valu Land location during Q4 of fiscal 2013.
“While the Michigan economy has stabilized, we continue to believe consumer discretionary spending will be pressured and that the competitive environment will remain robust,” Eidson said. “We are steadfastly committed to focusing our efforts on the initiatives that will help drive our business forward in a tough operating environment. We are encouraged by recent investments in our retail segment as, contrary to industry trends, we experienced slightly positive volume in our West Michigan stores when eliminating the impact of the calendar shift. We will continue to refine our private label offerings, marketing and loyalty programs, and Valu Land store format, while operating our business as diligently and prudently as possible. On the distribution side of the business, the contract recently signed with a significant new customer in the strategically important Ohio market is a testament to the strength of our operating model. Shipments to this customer are expected to begin late in the fourth quarter.”
Spartan anticipates that comparable store sales will be flat to slightly positive in Q4 as it continues to benefit from the maturation of its Yes Rewards loyalty program and a favorable Easter calendar. Distribution sales are expected to return to flat to slightly positive compared to the prior year as a result of new business gains and the Easter calendar shift.
Grand Rapids, Mich.-based Spartan Stores Inc. distributes more than 40,000 private and national brand products to approximately 375 independent grocery locations in Michigan, Indiana and Ohio, and 100 corporate-owned stores in Michigan, including Family Fare Supermarkets, Glen's Markets, D&W Fresh Markets, VG's Food and Pharmacy, and Valu Land.