Spartan Begins Upgrade of D&W

GRAND RAPIDS, Mich. — Spartan Stores here said growth in comparable-store sales, distribution revenues and the addition of D&W Food Centers helped drive sales and earnings growth for the fourth quarter and fiscal year that ended March 31.

In a conference call with analysts last week, Spartan said it had launched a remodeling program for its upscale D&W stores, and said it is taking its time to consider possible changes at the 20 Felpausch Food Centers that it is set to acquire next month.

“The [D&W] stores that we are remodeling now, we think take the D&W offering to another level,” said Craig Sturken, Spartan's chairman, president and chief executive officer. “We've done a lot of work. Our people have traveled around the Midwest and other parts of the United States to look at what's going on today, and we think that these completed projects will stand up to any upscale offering that you might find in the U.S.”

The company has completed one “major” remodeling effort at a D&W location in Kalamazoo, Mich., and has two more remodels on tap for the first quarter of fiscal 2008, Sturken said. Spartan acquired 16 D&W stores last year, and converted six to other banners.

The company also said it plans to invest about $5 million to $6 million over the next 15 months in the Felpausch Food Center stores, which it said in March it had agreed to acquire for $38.5 million in cash. Much of that investment will occur toward the end of that time span, Spartan said, as it evaluates the best approach for those locations.

Total capital expenditures for fiscal 2007 are expected to be $35 million to $40 million, excluding acquisitions.

For the fourth quarter of fiscal 2007, net income was up 36.4%, to $7.2 million, on a 23.6% gain in sales, to $559.5 million, compared with year-ago results. For the full year, net income rose 38.5%, to $25.2 million, on a 16.2% gain in sales, to $2.37 billion. The recent quarter and year also included an extra week. Comps, excluding gas and the extra week, rose 1.4% for both the fourth quarter and year.

In the retail segment, which will include 107 stores after the Felpausch acquisition is completed, operating earnings were up 93.9% in the fourth quarter, to $4.1 million, which included a $1.7 million gain due to the extra week. Retail sales rose 38.2% to $265.7 million, which included $19.4 million from the extra week, partially offset by lower sales at The Pharm drug chain.

Operating earnings in the distribution segment were up 19.2%, to $9.9 million, while sales increased 12.8%, to $293.8 million. As previously reported, Spartan last month acquired the distribution business for Martin's Super Markets, South Bend, Ind., which is expected to add more than $100 million in volume.