Growth in distribution sales helped SpartanNash post higher than expected earnings during the fiscal second quarter, despite declining sales in its retail and military segments.
For the 12-week quarter ending July 18, the Grand Rapids, Mich.-based company said consolidated sales were flat at $1.8 billion, while net earnings improved by 3.7% to $19.8 million. Earnings per share of 53 cents was above consensus expectations of 51 cents.
“In spite of a challenging sales environment, we grew operating profit and exceeded earnings expectations due to our disciplined cost controls, merger synergies and improved operational efficiencies,” Dennis Eidson, CEO, said in a conference call Thursday reviewing financial results. “While we experienced sales growth in our food distribution segment, sales in our retail segment were negatively affected by the closure of stores, lower fuel prices, a continued competitive retail food environment and unfavorable weather conditions in our Michigan markets.”
Eidson said sales that typically come with summer vacationers in lake communities around Northern Michigan didn’t materialize because “we just didn't really have a summer,” although he noted the weather has improved in recent weeks.
Distribution sales improved by 1.9% in the quarter, while profits in the segment jumped by 37%, reflecting synergies resulting from Spartan’s acquisition of larger rival Nash Finch, and highlighted by the rollout of new merchandising strategies for customers including “wall of value” and “basket of value” programs, Eidson said.
“As these programs take hold and gain greater acceptance, we're beginning to see a corresponding lift in sales volume.”
In the retail segment, comp sales fell by 3.2% excluding fuel, which was lower than expected, and triggered by new competition, unseasonably cool weather, and the continued impact of a low inflationary environment. Eidson said however that SpartanNash was making progress improving acquired units, having completed 13 remodels.
The company is also launching a new ad campaign known as “Things Are Good Here,” focusing on improve perception of shopping experience at those stores. A similar campaign will launch in Spartan’s Family Fare stores in Michigan, he said.
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