GRAND RAPIDS, Mich. -- Spartan Stores here said last week it expects to double sales to $7 billion by the end of fiscal 2005 through additional acquisitions and internal growth initiatives.
The company also said it expects to increase earnings per share 10% in fiscal 2001 and approximately 20% the following year.
Spartan, which became a public company in August, released results for its first quarter as a public company last week, which showed increases in sales and earnings for the second quarter and first half ended Sept. 9.
Speaking to securities analysts in a conference call last week, James B. Meyer, chairman and chief executive officer, said Spartan expects to grow its retail division through acquisitions, including buying up wholesale customers who opt to leave the business. "As the competitive landscape evolves, we can be the exit strategy of choice for many of the 400 independent customers we serve as a wholesaler," he said.
Meyer said the company's retail operations -- consisting of 119 stores acquired since January 1999 -- account for 36% of Spartan's total sales.
According to Meyer, the loss of locally-based D&W Food Centers as a customer, which becomes effective Nov. 1, will not have a significant impact on financial results. D&W represents less than 4% of total revenues, he noted.
"We understand the risks of a retail strategy -- and it's possible other independent customers will leave -- but we feel the benefits far outweigh the risks," Meyer said. "The loss of D&W will be offset by cost-cutting measures and improved efficiencies, and it won't significantly impact our overall results."
Asked how Spartan expects to fit into the retail environment, Meyer replied, "We've changed very rapidly in just two years as we've recognized that to continue as a distributor only, with no retail presence, was a strategy with a clouded future at best. So we've redefined who we are -- a self-distributing regional chain with a distribution segment that meets the needs of independent wholesale customers."
He said the company has no qualms about competing with supercenters "because we share a hometown with Meijer. For 80 years we've grown up with them and our wholesale customers have competed against them.
"The goal of our stores is to develop as an alternative to supercenters. We believe there will always be a place for a good, independent-minded alternative to supercenters, and our objective is to be that company, and we believe we can be successful by offering more convenient locations with a local focus."
According to Joel Barton, Spartan vice president, retail, "We're not trying to imitate supercenters but to offer an alternative. Our stores are neighborhood markets that connect with the demographics and dynamics of local customers by offering good values through focused marketing and effective category management, plus a multi-tiered private label program that offers items consumers can't buy elsewhere."
The company said sales rose 9.2% to $784.9 million for the 12-week quarter and 7.6% to $1.5 billion for the first half, while net income rose 75.3% to $9.0 million for the quarter and 26.6% to $12.7 million for the half. Same-store sales for its retail division rose 5%, Meyer said, of which less than 1% resulted from moving to Sunday openings in the Grand Rapids market.