Spartan Posts Q3 Profit, Sales Gains

GRAND RAPIDS, Mich. — Following on the heels of its successful integration of D&W Food Centers, Spartan Stores here last week said it was continuing to eye additional acquisitions in and around its core operating area.

“We'll be aggressive in the pursuit of this strategic objective, but we will not make a mistake,” said Craig Sturken, chief executive officer, in a conference call discussing the company's results for its fiscal third quarter.

Asked by an analyst about the timing of additional acquisitions, Sturken said the company would approach new opportunities cautiously.

“There are opportunities for us, but we want to be sure we pull the trigger on the right one,” he said. “It is more about analyzing and being sure it will work for us, and that we don't preempt a better opportunity by getting into something a little bit quicker than we should.”

The company said revenue gains from its acquired D&W Food Centers and from 3.2% comparable-store sales growth helped drive net income up 75.6% in the 16-week third quarter that ended Dec. 30, to $5.9 million, compared with year-ago results. Sales totaled $723.5 million in the period, a gain of 12.7%, which included $52 million from the 16 acquired D&Ws. Excluding fuel sales, comps were up 0.6% in the quarter.

Net income for the 40-week, year-to-date period totaled $17.9 million, up 39.3%, on sales of $1.8 billion, up 14.1%, compared with prior-year results.

The company said the third-quarter acquisition of the pharmacies inside the D&W stores — they had been operated by Minneapolis-based Prairie Stone Pharmacy since before Spartan's acquisition of D&W early last year — will help drive revenues and profits in the future. Sturken said the acquisition price was between $3 million and $5 million.

Spartan's third-quarter distribution sales were up 3.2%, to $387 million, which it attributed to new business and increased sales from existing customers. Operating income in the segment was up 9.1%, to $7.9 million.

Retail sales were up 25.9% in the quarter, to $336.6 million, which reflected the gains from the acquired stores as well as a decline in sales at the company's Pharm discount drug banner in Ohio. The company said about 10-12 Pharm stores were impacted by the opening of a new Wal-Mart supercenter. Unseasonably warm weather in northern Michigan also had a negative impact on sales in the region, which is a skiing destination.

Operating income in the retail segment increased more than fivefold, to $5.2 million, vs. $1 million in the year-ago period. Last year's results included a one-time charge of $600,000. Operating income improved because of the additional sales volume and efficiencies related to the D&W acquisition and gains at other company-owned stores.