GRAND RAPIDS, Mich. — Spartan Stores here last week said driving top-line growth remains a struggle amid the difficult economic conditions in Michigan and increasing supercenter competition, although trends may be improving.
Despite posting a 4.4% decline in comparable-store sales for the fiscal third quarter, excluding gas, Spartan said it sees some reasons for optimism — comp-store trends improved from the second to third quarter, and the trend accelerated early in the fourth quarter.
“I would say the pace of improvement from [quarter] three to four is significantly better than the pace of improvement we saw from [quarter] two to three,” said Dennis Eidson, president and chief executive officer, Spartan Stores. “So we're somewhat heartened by that, but still pretty cautious. It is a difficult consumer to try to figure out, but we are feeling a bit better.”
As another indication of improving consumer sentiment, Eidson cited improving sales trends among higher-end private-label products, and the reverse trend at the lowest-end Valu Time brand.
“That tells me the upscale consumer is feeling good, maybe all consumers are feeling just a little bit better, trading up a little bit,” he said.
In addition to signs of improving sales trends, overall profitability improved in the third quarter amid cost containment and other initiatives, plus the benefit of some one-time gains.
The company said net earnings for the 16-week quarter, which ended Jan. 1, were up 45%, to $7.3 million, after some $2.4 million in non-cash gains in the recent period. Consolidated (retail and wholesale) sales were down about 0.6%, to $782.3 million.
Adjusted third-quarter operating income, excluding one-time non-cash gains in the recent quarter, totaled $14.2 million, vs. $14.4 million in the year-ago third quarter. EBITDA remained about flat at 3.3% of sales.
Improved cash flow, driven largely by improvements in the distribution segment, allowed the company to reduce debt by $47 million vs. year-ago levels, Spartan said.
Adjusted operating income in the retail segment was $900,000, vs. $2.6 million in the year-ago period, while sales were down about 1.8%, to $435.4 million.
The company also said it was “pleased with the progress” of the introduction of the Yes Card loyalty program at its 16 VG's Food and Pharmacy locations, noting that the company has tweaked the effort since the card debuted at its Glen's stores in 2009.
Eidson said the company hoped to roll the cards out to additional banners.
* EXCLUDING GAS. **REFLECTS A NON-CASH GAIN OF $2.4 MILLION IN THE MOST RECENT QUARTER AND A NON-CASH LOSS OF $700,000 IN THE YEAR-AGO PERIOD.