SPARTAN TO CONTINUE MOVE INTO RETAIL

TRAVERSE CITY, Mich. -- Spartan Stores plans to continue its metamorphosis from a wholesaler/distributor to a wholesaler/retailer, James B. Meyer, president and chief executive officer of the Grand Rapids, Mich.-based company, told shareholders at last week's annual meeting here."Spartan Stores can no longer function solely as a wholesaler/distributor," Meyer declared. "If other wholesalers or retailers

TRAVERSE CITY, Mich. -- Spartan Stores plans to continue its metamorphosis from a wholesaler/distributor to a wholesaler/retailer, James B. Meyer, president and chief executive officer of the Grand Rapids, Mich.-based company, told shareholders at last week's annual meeting here.

"Spartan Stores can no longer function solely as a wholesaler/distributor," Meyer declared. "If other wholesalers or retailers employ a retail-acquisition strategy, we must not allow them to consolidate our customers into their operations."

Since October Spartan has acquired 44 units of three Michigan-based chains -- Ashcraft's Markets, Harrison; Family Fare, Hudsonville; and Glen's Markets, Gaylord -- "which have quickly positioned us as a major retail force in Michigan," Meyer said. Spartan operates its corporate stores under their existing names as part of its new Valuland division.

During last week's meeting the company released financial results for the year ended March 27. They included record sales and earnings. The company said sales rose 7% to $2.7 billion and net income jumped 10% to $14.8 million, or $1.33 per share -- the third straight year of earnings records.

According to Chuck Fosnaugh, vice president for development, sales rose $182 million over the prior year, with 21% of the increase, or $38 million, emanating from the company's grocery-distribution segment, which he attributed primarily to more promotional efforts and the addition of new pharmacy business.

Fosnaugh said the sales increase was partially offset by declines in sales of store equipment because of a reduction in store-development activity, declines in certain grocery categories due to competitive activities and the discontinuance of Spartan 's over-the-road trucking operation.

In Meyer's presentation he talked about the need to recast Spartan to enable it to survive in a changing and consolidating industry, including its decision to operate corporate stores.

"As Spartan progresses, these strategies will benefit the customer by improving efficiencies, enabling us to pass along the cost savings," he said. "We maintain and even strengthen our purchasing power through our retail division and our independent customers, making us more attractive to new retail customers.

"In light of the mammoth changes in this industry, our objective has been and will be to assure sales volume for the warehouse and to secure the greater efficiencies that arise from this structure, which will ultimately benefit our customers and shareholders with improved earnings," Meyer added.

But he also noted that Spartan does not intend to stint on its wholesale operations. "The makeover of Spartan must focus on turning the company into a high-performance, high-commitment organization, one that is literally obsessed with customer service at the lowest possible cost to drive shareholder value," Meyer said.

He said Spartan is studying the benefits and possibilities of e-commerce, "and we will continue to monitor developments in that arena with a view to if and how it might fit with current business," he explained.

"We are examining every business and service we provide to determine if it fits within a more focused business philosophy and makes economic sense. If not, we will pursue alternate solutions, including outright sale, as we did with our for-hire freight service.

"While we need to keep our eye on developing new ways to serve our customers, our top priority is to streamline our delivery of goods and services."

Meyer reminded shareholders of what he told them at last year's annual meeting -- that Spartan must reinvent itself to survive.