Spartan's Comps Decline in Q1

GRAND RAPIDS, Mich. — Operating in one of the regions hardest hit by the economic downturn, Spartan Stores here last week said its comparable-store sales fell 1.8% in the first quarter, excluding the impact of fuel-price deflation and the effect of the later Easter holiday this year.

Overall retail sales, however, were up 18.7%, primarily due to the acquisition last year of the VG's chain and to the $2.2 million sales bump from Easter.

The company projected that its comps would remain under pressure for the rest of the year due to the weak economic conditions and increasing competition from supercenters and other formats, as well as difficult comparisons with year-ago results.

Net income for the quarter, which ended June 20, was down about 28%, to $6.9 million, although operating earnings were up slightly to $15.1 million, compared with $15.0 million a year ago. Total sales, including distribution revenues, were up about 1.6%, to $596 million for the quarter, compared with the first quarter of a year ago.

Spartan said it was aggressively promoting its entry-level Valu Time private-label offering and looking for opportunities to price competitively on commodity items.

“Everybody is talking about the flight to value, and we're seeing it and feeling it, and so we are trying to respond accordingly,” said Dennis Eidson, president and chief executive officer, Spartan Stores.

The company also saw private-label penetration increase to 24.65% on a unit-sales basis in the period, up 1.83% over a year ago.

Eidson said the company continues to add products to the Valu Time line, and promotes “somewhere around 250 items” from the line in many stores every week.

The increase in private-label penetration accounts to some degree for the decline in comp-store sales, he explained. In addition, the company experienced deflation in some high-volume categories, such as dairy, meat and produce, compared with the first quarter of a year ago.

Customer counts were down “less than half a percent,” while average basket size was down about 0.5%.

“We feel pretty good about holding the customer count, particularly against the backdrop of what's going on in our state,” Eidson said, citing the bankruptcies of Chrysler and General Motors and the 15.4% unemployment rate — almost double the year-ago level. He also said unseasonable weather in northern Michigan was dampening sales at the company's Glen's Market locations in the tourist-centered areas of northern Michigan.

The company is pleased with a test of a loyalty-card program at Glen's, however, describing it as “well-received.”

Q1
RESULTS

* EXCLUDING GASOLINE AND THE IMPACT OF THE EASTER HOLIDAY.