Coronavirus-driven demand lifted food distribution and retail sales at SpartanNash by double digits in the fiscal 2020 first quarter, with earnings per share exceeding the high end of Wall Street’s projections.
For the 16 weeks ended April 18, net sales totaled $2.86 billion, up 12.4% from $2.54 billion in the prior-year period, SpartanNash said late Wednesday. The Grand Rapids, Mich.-based grocery distributor and retailer attributed the gain to higher sales in all business segments during the coronavirus pandemic, as well as to growth with existing food distribution customers.
SpartanNash’s core food distribution business saw net sales jump 17.1% to $1.37 billion in the first quarter from $1.17 billion a year earlier, reflecting incremental volume from the impact of COVID-19 and increased sales to current customers.
Meanwhile, retail segment sales rose 11.5% to $782.6 million from $701.8 million, also spurred by higher customer demand during the pandemic, SpartanNash said. Comparable-store sales surged 15.6% year over year, partially offset by lower fuel prices and store closures. The company noted that e-commerce sales volume swelled more than 300% during the last six weeks of the quarter. SpartanNash operates 155 supermarkets, mainly under the Family Fare, Martin’s Super Markets, D&W Fresh Market, VG’s Grocery and Dan’s Supermarket banners.
Net sales for the military distribution business edged up 4.9% to $704.4 million from $671.4 million a year ago. COVID-19 also increased sales volume to military customers, partially offset by lower comp sales at Defense Commissary Agency-operated locations before the onset of the pandemic.
“I am incredibly proud of our family of associates, from those within our retail stores to our supply chain team and all of those supporting their efforts to serve our local customers and communities during this significant time of need for food, pharmacy, household and personal care products,” SpartanNash Interim President and CEO Dennis Eidson said in a statement. “Our No. 1 priority continues to be the well-being and safety of our entire team, particularly those on the front lines, who have been driving our business forward every day.”
All three business segments experienced a “significant increase in demand” starting in mid-March, the 11th week of the first quarter, as consumer stock-up purchases boosted sales volumes, according to SpartanNash. Also driving higher demand was a shift to food-at-home purchases due to stay-at-home orders and state-mandated business shutdowns, including restaurants, the company said.
In the food distribution, sales were up 9.5% year over year for the first 10 weeks of the quarter, but that growth climbed to 29.7% for the last six weeks, SpartanNash reported. A more dramatic gain was seen in the retail segment, as comp-store sales (excluding fuel) were flat through the first 10 weeks but surged to 42% growth the last six weeks. Military distribution sales were down 3.2% over the quarter’s first 10 weeks get achieved 18.1% growth in the final six weeks.
“Our ability to respond to unprecedented consumer demand during the quarter enabled us to significantly exceed our expectations for the quarter,” Eidson commented.
At the bottom line, SpartanNash posted first-quarter net income from continuing operations of $15.4 million, or 43 cents per diluted share, compared with $7.5 million, or 21 cents per diluted share, in the prior-year period. On an adjusted basis, earnings from continuing operations came in at $24.1 million, or 67 cents per diluted share, versus $8.5 million, or 24 cents per diluted share, in the fiscal 2019 quarter.
Adjusted net income reflects higher restructuring and asset impairment costs, including charges from the closure of the Caito Fresh Cut business; a voluntary early retirement program and other reductions; increases in incentive compensation; and incremental pay and bonuses for frontline associates during the pandemic. The company said it also realized tax benefits from the adjustments as well as from the federal CARES Act. Other COVID-19 costs included increased cleaning and sanitation frequency in all operating locations, including sanitization of high-touch surfaces, fogging of distribution sites, installation of sneeze guards at checkouts and suppling masks and gloves to all associates.
Analysts, on average, had forecast adjusted EPS of 47 cents, with estimates ranging from a low of 26 cents to a high of 65 cents, according to Refinitiv/Thomson Reuters.
Because of the uncertainty surround the coronavirus crisis, SpartanNash has revised its full-year guidance, though the company said it expects fiscal 2020 sales to “materially exceed” its previous outlook provided on Feb. 19.
SpartanNash now projects reported fiscal 2020 EPS (continuing operations) of $1.48 to $1.81, compared with its earlier estimate of 93 cents to $1.04. Adjusted EPS is pegged at $1.85 to $2.00, up from the previous forecast of $1.12 to $1.20. The company noted that it expects second-quarter adjusted EPS to climb 70% to 100% over year-ago adjusted EPS of 33 cents.
“We are raising our annual outlook to reflect our strong first-quarter execution in a challenging and evolving environment,” Eidson stated. “Going forward, we remain committed to enhancing our long-term strategy as we build upon SpartanNash’s existing foundation and increasingly position the company to sustain profitable growth.”
Wall Street’s consensus estimate is for fiscal 2020 adjusted EPS of $1.68, with projections running from $1.15 to $2.42, according to Refinitiv/Thomson Reuters. The average estimate for the second quarter is 46 cents, with a range of 36 cents to 56 cents.
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