GRAND RAPIDS, Mich. — Spartan Stores here said Thursday that profits in the first fiscal quarter were pressured in part by the launch of its “Yes Is More” promotional campaign tied to its new Yes Rewards loyalty program.
For the 12-week quarter that ended June 23, the company said net income was basically flat at about $6 million, while sales were up about 0.2%, to $603.9 million. In the retail segment of its business, Spartan said operating earnings were down about 41%, to $3.9 million, compared to the first quarter of a year ago. Sales in retail were basically flat at $345.6 million, vs. $345.4 million a year ago. Comparable-store sales, excluding fuel, were up 0.1% — an improvement in the run rate of recent quarters, the company said.
“We are pleased with our ability to improve the sales momentum in our retail segment, despite continuing to operate in a challenging environment during the first quarter,” said Dennis Eidson, Spartan’s president and chief executive officer. “We remain focused on tightly managing the controllable aspects of our business and believe the marketing and promotional efforts around our Yes Rewards program will continue to enhance and emphasize our value offering to the consumer.”
While the Yes Is More campaign helped drive sales during the quarter, the costs involved in its launch also impacted profitability, the company said. Operating profits in the retail segment were also impacted by grand opening and relocation costs, reduced inflation and “market conditions in certain fresh departments.”
Read more: Spartan Expands Valu Land
Operating earnings in Spartan’s distribution segment were up about 5%, to $7.8 million, which the company attributed to lower employee incentive compensation expense and improvements in expense controls, partially offset by a lower gross profit margin due to reduced inflation.
Sales in distribution were up slightly, to $258.3 million, vs. $257.1 million a year ago.
Eidson said the company is focusing on driving sales in both retail and distribution though an expansion of its private-label program. During the quarter the company launched 136 net new private-brand items, and for the full year the company expects to introduce approximately 400 items, representing an an increase of 10% over last year.
In addition, Spartan said it is encouraged by the sales performance of its latest Valu Land price-impact store, and is planning three to five new Valu Land locations during the second half of the current fiscal year.
Spartan said the near-term environment will remain difficult, noting that its comps could turn negative in the second quarter. It is projecting flat comps and earnings for the full year.
Through the remainder of the year, Spartan said it expects the pace of the economic recovery to continue, “although at a slower rate.”
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