GRAND RAPIDS, Mich. -- Spartan Stores here said it would support expansion efforts by its distribution customers in eastern Michigan, but seemed to indicate it was not interested in acquiring the Farmer Jack banner, which A&P said last week it would seek to sell.
"We see, in the near term, an opportunity for us to garner additional distribution sales through our retailers, primarily on the east side of the state, where there seems to be some activity," said Craig Sturken, chairman, president and chief executive officer, in a conference call with analysts discussing the company's fiscal year-end results. "We are working with our retailers, and we are ready, willing, and able to support them in their growth."
Sturken said Spartan expects to grow its own retail business by two to four stores per year to fill in existing operating areas. He said it could be open to acquiring "a smaller business that might be within the trade area that we operate."
He made his comments before A&P confirmed it would seek to sell the Farmer Jack chain, but after widespread speculation that the banner would be divested.
In other news from the call, Sturken said Spartan continued to expand its private label in the fourth quarter. The company said it began converting to the Top Care line of private label health and beauty care products at its Pharm discount drug store banner. It also began to replace its Home Harvest private-label grocery line with the Value Time brand. Both Value Time and Top Care are private labels offered by Topco Associates, Skokie, Ill.
During the year, private-label penetration increased by about 5% inclusive of both retail and wholesale sales, the company said.
"Our private-label program continues to have promising growth areas, including organic and natural food categories and the introduction of new brands," Sturken said. "These strategic initiatives will significantly expand the breadth of our private-label offerings by providing more products at more competitive price points."
Spartan said its results for the 12-week fourth quarter ended March 26 were among the best the company has reported in recent years, boosted by the early Easter this year, greater efficiencies in retail operations, and other factors.
Net income for the quarter more than tripled, to $5.8 million, compared with net income of $1.7 million in the year-ago quarter, on a slight increase in sales, to $457.6 million, compared with $456.9 million in last year's fourth quarter.
The net income comparison was impacted by a charge of $3.7 million in the year-ago fourth quarter for the implementation of a retail inventory and margin management system. Excluding the charge, fourth-quarter gross margins still improved by 40 basis points, the company said.
Comparable-store sales at the company's 58-store supermarket division were up 3.7%. Overall comp-store sales, including sales at the Pharm banner, were up 2.3%. The company said fuel sales and a change in its bottle-deposit accounting boosted comps by about 1.2%, while the early Easter boosted comp results by about 1.6%.
Fourth-quarter operating earnings in the retail segment increased to $1.4 million, up from a loss of $5.7 million in the fourth quarter of a year ago. The improved performance resulted, in part, from better gross margins due to increased shrink controls and lower product costs through the implementation of category management.
On the distribution side, fourth-quarter sales were flat at about $258.8 million, while operating earnings increased to $6.5 million, from $5.8 million in the year-ago fourth quarter.
For the year, Spartan reported overall net income of $18.8 million, vs. a loss of $6.7 million in the preceding year. Operating earnings were $37.5 million, nearly three times the prior-year level of $12.6 million.
Sales for the year were down 0.6%, to $2.04 billion, reflecting lower sales in the Pharm division and in distribution. The most recent year did not include sales from a former single-store joint venture, which contributed $4.3 million in sales in the year-ago fourth quarter alone.
The early Easter in fiscal 2005 added about $3 million each to the company's retail and distribution divisions, the company said. The results for the first quarter of fiscal 2006, which did not contain the pre-Easter spending, are expected to be off by a similar amount, the company said.
