GRAND RAPIDS, Mich. — Spartan Stores’ new Valu Land discount concept will expand by three to five new stores this fiscal year, and officials see the potential for the store as an organic growth vehicle outside of Michigan.
As reported in SN in March, Spartan began testing the limited-assortment concept late last year at converted Glen’s Markets and Family Fare sites. It opened its first ground-up Valu Land site earlier this month in Lansing, Mich.
“While we are still very early in the development and testing of this format, we are excited about the potential organic growth opportunity it could provide in certain existing markets and locations outside the state of Michigan,” Dennis Eidson, Spartan’s chief executive officer, said. “Additionally, we hope to leverage our learnings from this format to benefit our distribution customers.”
Eidson described Valu Land as a store with appeal to shoppers impacted by the recession, but with a wider selection and fresh offerings that differentiate it from other discounters and dollar stores.
“We didn’t have anything in the portfolio that appealed to a more value-conscious consumer like an Aldi or a Save-A-Lot or even dollar stores,” he explained. That demographic, he added, was “underserved even by the existing value players, because this [Valu Land] model is significantly different than what you would see from an Aldi or a Save-A-Lot, not only on the number of SKUs, but a far more significant presentation in produce and meat.”
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Valu Land stores average 18,000 to 20,000 square feet and carry around 7,000 SKUs, including one national-brand offering in each category in addition to the Spartan and Valu Time private labels.
Eidson said the stores converted from conventional banners to Valu Time were seeing increased volumes, but said the lower prices have tempered dollar sales growth.
Spartan detailed the progress of Valu Time during a conference call last week reviewing financial results for the fourth quarter and fiscal year ended March 31. Quarterly consolidated sales of $614.8 million increased 7.6% due mainly to a 13th week in the quarter and higher gasoline prices. Comparable-store sales adjusted for the same 13-week period fell by 3%, as consumer spending in slow-recovering Michigan markets remained under pressure, Eidson said. Net earnings of $10.5 million increased 37%; when adjusted for a tax charge and an extra week, earnings would have increased by 16.7% to $9.1 million.
“Operationally we believe that Spartan executed very well,” Ajay Jain, an analyst with Cantor Fitzgerald said in a research note last week. “However, consistent our read-through of recent results for other retailers in the grocery sector, fundamentals appear to be getting incrementally worse.”
For the fiscal year, consolidated net sales increased 4% to $2.6 billion, and comparable-store sales for the 53-week year declined by 1.6%. Net earnings of $31.8 million decreased by 1.8%.