GRAND RAPIDS, Mich. -- Spartan Stores here last week posted a loss of $57.1 million for the third quarter ended Jan. 4 as the weak economy and price-based competition put increasing pressure on the wholesaler and retailer.
The company said it saw some encouraging signs in both its retail and distribution operations during the course of the 16-week period, however. In addition, the company said it has exceeded its targeted debt repayments for the period, a fact that at least one analyst said he found encouraging.
Spartan, which recently said it was considering "strategic alternatives" for its 39 Food Town stores in Ohio and Michigan and is closing a warehouse in Ohio, said the loss for the quarter would have been $1.6 million if not for asset-impairment charges totaling $85.2 million.
Sales in the company's retail division, which includes 55 supermarkets under various banners and 21 Pharm discount drug stores in addition to the 39 Food Town outlets, totaled $384.1 million in the period, down 12.6% from year-ago levels, when the company had 15 more stores. Excluding the effect of closed stores, retail sales fell 6.4%, and comparable-store sales were down 8.5%.
James B. Meyer, chairman, president and chief executive officer, said despite the disappointing sales declines, he was encouraged by trends in customer counts in certain areas where the company implemented strategic promotional programs.
"In some areas we saw declines in the mid-single digits in customer counts at the start of the quarter, but by the end of the quarter we were seeing increases in the low single digits," he said in a conference call with analysts.
He attributed the gains to the company's promotional activity and to its strategy to separate its retail and wholesale merchandising teams.
Excluding the asset-impairment charge, the operating loss in the retail division was $16.3 million, compared with an operating loss of $2.3 million a year ago.
"The retail outlook remains challenging as many operators are sacrificing gross margins to retain market share," Meyer said.
Total sales for the company were down 6.2%, to $995.4 million, compared to results from the third quarter of a year ago.
In the grocery-distribution division, sales were down 2.8%, to $346.7 million, compared with year-ago results. Meyer said the company saw steady improvements from the 8.9% decline in distribution sales posted in the second quarter.
Operating income for the grocery-distribution division was $4.8 million, down 11% from year-ago levels.
The company said it used the $40 million in proceeds from the previously announced sale of seven shopping centers in Michigan to pay down debt, reducing its outstanding bank loans to $185.5 million, vs. $286.5 million at the start of the fiscal year last March.
"I think most encouraging of all is the strengthening of the balance sheet, and the willingness of management to take some pretty strong action with the assets, i.e., selling some assets and looking at strategic alternatives for the Food Town stores," said Chuck Cerankosky, analyst, McDonald Investments, Cleveland. "I think they are doing what they need to do in a very competitive and consolidating retail food market."
Although the company has been reported to be seeking a buyer or buyers for its Food Town stores in Ohio and Michigan, the company said it would not discuss what other alternatives might be considered. Meyer said the company expected to report further on the planned course of action for the stores by the end of its fiscal year in March.
