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    Spartan Sales Up a Bit in Q2

    CEO says investment in initiatives starting to pay off

    Spartan Stores Inc. reported consolidated net sales for its 12-week second quarter increased 0.3 percent to $621.6 million, compared to $619.6 million in the same period last year.

    Adjusted earnings for the second quarter of fiscal 2012 ending Sept. 15 were $29 million, or 4.7 percent of net sales, compared to $31.1 million, or 5 percent of net sales last year.

    “We continue to invest in the initiatives that are helping us to best deliver value and convenience to consumers in today's challenging economy,” said Dennis Eidson, Spartan’s president and CEO. “While the cost of these investments has had an impact on retail margins, our second quarter retail market share and volume results reflect the consumer’s acceptance of these initiatives, as well as, the growing momentum of our YES Rewards loyalty program.”

    Q2 earnings from continuing operations were $10.4 million, or 47 cents per diluted share, including an after-tax asset impairment charge of $0.2 million, or a penny per diluted share, and an after-tax benefit from the sale of assets of $0.4 million, or 2 cents per diluted share.

    Gross profit margin was 21 percent versus 21.4 percent in the same period last year. The decline in gross profit margin was due to reduced inflation-driven inventory gains in both the retail and distribution segments, investments associated with the second phase of the “Price Freeze” and “Yes Is Even More” promotional campaign in the retail segment, as well as a higher mix of lower margin distribution and fuel sales.

    Q2 operating expenses were $111.3 million, or 17.9 percent of net sales, compared to $112.8 million, or 18.2 percent of net sales in the same period last year, due to continued productivity improvements in the distribution segment, lower employee-related expenses compared to the prior year period and the impact of unusual corporate professional fees in the second quarter of the prior year.

    Net sales for the distribution segment increased to $259.2 million in Q2 from $256.2 million in the same period last year. Q2 operating earnings for the distribution segment were $10.8 million, compared to $8.8 million in the same period last year.

    Net sales for the retail segment were $362.3 million in Q2, compared to $363.4 million in the same period last year. Same-store sales, excluding fuel, were down 1 percent. As anticipated, Q2 sales were negatively affected by a one week shift in the quarter end date which resulted in less high volume summer sales days being included in this year’s second quarter. Q2 operating earnings for the retail segment were $8.1 million compared to $11.2 million in the year-ago period.

    During Q2, Spartan remodeled two stores and opened one new fuel center, ending the quarter with 97 stores and 29 fuel centers. The company plans to complete two major remodels and open three new Valu Land locations during the second half of fiscal 2013.

    “Although we are seeing signs of improvement in the Michigan economic indices, the overall pace of recovery is slower than we had originally anticipated and the majority of our consumers are still highly price sensitive,” Eidson said. “We remain focused on all aspects of our business in order to drive sales and are encouraged by the initial benefits of our recent pricing and promotional efforts, as well as the new Valu Land store format. We will continue to make strategic promotional and capital investments to drive higher volumes, while focusing on improving profitability.”

    Grand Rapids, Mich.-based Spartan Stores Inc. distributes more than 40,000 private and national brand products to 375 independent grocery locations in Michigan, Indiana and Ohio, and to 97 corporate owned stores in Michigan, including Family Fare Supermarkets, Glen’s Markets, D&W Fresh Markets, VG’s Food and Pharmacy, and Valu Land.

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