After tallying gains a year ago from an extra business week and pandemic-driven demand, SpartanNash reported adjusted EBITDA of $43 million for the fiscal 2021 fourth quarter, ahead of analysts' consensus forecast.
“Our top and bottom [line] results for 2021 are squarely in line with the guidance we provided at the start of the year and have reaffirmed throughout,” President and CEO Tony Sarsam told analysts in a conference call on Thursday. “We did this while reinvesting in the business to support future growth and driving greater efficiencies,” he added.
Excluding about $158.9 million from the 13th week in fiscal 2020, net sales for the 12-week fiscal 2021 fourth quarter ended Jan. 1 were virtually flat, up 0.2%, despite a comparison to surging COVID demand that began in 2020, SpartanNash said. For the 2021 quarter, net sales totaled $2.09 billion versus $2.25 billion a year earlier. Overall net sales for the 52-week 2021 fiscal year were $8.93 billion, a decrease of 4.5% from $9.35 billion in the 53-week fiscal 2020. Backing out the extra week, full-year net sales decreased 2.8% year over year.
The 2021 results came against a difficult year-over-year comparison, as the Grand Rapids, Mich.-based grocery distributor/retailer had recorded net sales gains of 12.5% in the fourth quarter and 9.5% for the year in fiscal 2020, reflecting the 53rd week and high demand spurred by the pandemic.
"Despite facing steep comparisons to 2020 COVID demand, we’re very happy with our 2021 performance." — Tony Sarsam, SpartanNash CEO (Photo courtesy of SpartanNash)
While SpartanNash comparisons to 2020 were solid, there was a decrease in volumes related to its military segment. Foot traffic at commissaries has yet to return to pre-pandemic levels after domestic base access restrictions and favorable prior-year sales driven by the COVID-19 pandemic in the retail and food distribution businesses. That was partially offset by elevated inflation and continued growth among some food distribution customers, the company said.
By business unit, food distribution net sales in the 2021 fourth quarter totaled $1.03 billion. Excluding $76.4 million in sales from the extra week, net sales increased $5.7 million. Full-year food distribution sales came in at $4.46 billion, including the 53rd week.
“We continue to see an upward trend in inflation as the quarter progressed, particularly in our core distribution business, averaging above 7%,” Chief Financial Officer Jason Monaco said in the call. “Certain categories, including proteins and produce, continue to see the largest increases, while core grocery categories increased in the range of about 5%. We still anticipate further inflationary increases into 2022. However, as we previously noted, we expect that these increases will be passed through to our customers.”
SpartanNash’s corporate-owned supermarkets saw comparable-store sales grow by 7.3% year over year in the fourth quarter and by 16.9% on a two-year stack, fueled by increased store traffic and the impact of inflation. Total retail net sales were $613.1 million for the quarter and $2.58 billion for the year, including $49.1 million from the extra week.
Overall, SpartanNash operates 145 grocery stores in Michigan, Indiana, Iowa, Minnesota, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin under the banners D&W Fresh Market, Dan’s Supermarket, Family Fare, Family Fresh Market, Forest Hills Foods, Martin’s Super Markets, No Frills Supermarkets, SunMart, Supermercado Nuestra Familia and VG’s Grocery.
“Fourth-quarter performance in our retail segment grew top-line, with one-year comps of 7.3%. We have continued to see strength in food-at-home consumption and increased sort wrapping. Despite the acute labor challenges, we’ve continue to execute remarkably well in the stores, which drove results. Lastly, our slight net price increases had minimal impact on consumption,” Sarsam said.
Net sales in the military segment fell 13.4% to $445.4 million in the fiscal 2021 fourth quarter and were down 11.3% to $1.89 billion for the full year. SpartanNash said that, besides extra-week sales of $33.4 million a year ago, the declines reflect continued lower volumes at domestic bases and reduced export sales due to supply chain challenges, partially offset by inflation.
“In our food and military distribution segments, in particular, we continue to navigate through the industrywide labor and supply-chain pressures,” Sarsam said in the call. “We remain focused on our supply-chain transformation initiative, which we believe will position the company for improved profitability and long-term success.”
“We are seeing some tailwinds, including food inflation increases, which have improved our gross margin rates,” he noted. “So, despite facing steep comparisons to 2020 COVID demand, we’re very happy with our 2021 performance, as it grew our top line and met our profitability objectives.”
At the bottom line, SpartanNash turned in fiscal 2021 fourth-quarter net income of $22.2 million, or 62 cents per diluted share, compared with $12.1 million, or 34 cents per diluted share, a year ago. Adjusted EBITDA was $43 million, compared with $48.9 million in the 2020 quarter ($44.6 million excluding the extra week).
Fourth-quarter adjusted earnings per diluted share were in analysts' forecast range at 18 cents, compared with 43 cents in the 2020 quarter (35 cents per diluted share excluding extra week). Analysts, on average, had projected adjusted EPS of 23 cents for the 2021 quarter, with estimates ranging from 18 cents to 30 cents, according to Refinitiv.
Fiscal 2021 net earnings totaled $73.8 million, or $2.05 per diluted share, versus $75.9 million, or $2.12 per diluted share, in fiscal 2020. Adjusted EBITDA for fiscal 2021 was $213.7 million, compared to the company’s guidance range of $205 million to $210 million. Adjusted EPS for fiscal 2021 was $1.70 per diluted share versus $2.53 per diluted share a year earlier ($2.45 per diluted share excluding extra week). Wall Street’s consensus estimate was for adjusted EPS of $1.76, with projections running from $1.70 to $1.83.
“We’re almost two full years into the pandemic. Despite the unpredictable nature of COVID and its variants, SpartanNash associates again executed with excellence to serve our customers in 2021,” Sarsam told analysts. “Every person has been impacted in some way by COVID. Yet our associates continuously ensured that our stores remained open, shelves were stocked, products were safely delivered, and our military heroes had the supplies they needed. Through our pharmacies, we ensured that patients had access to medication and testing that was critical in keeping our communities healthy. To date, we’ve administered over 150,000 vaccines. I’m incredibly proud of their efforts.”
Looking ahead, SpartanNash projects fiscal 2022 adjusted EPS of $2.10 to $2.25 and adjusted EBITDA of $214 million to $229 million. SpartanNash expects to sustain consolidated net sales levels, with a range of $8.9 billion to $9.1 billion. In retail, the company expects sales to increase 2% to 4%.
*Editor's Note: Article updated with additional information.