GRAND RAPIDS, Mich. — Spartan Stores here Wednesday said the early Easter holiday and new wholesale accounts helped the company report better-than-expected earnings in the fiscal fourth quarter, although both sales and net income fell for the period.
The company also said its new Valu Land discount banner was experiencing mixed results in its first few locations in Detroit, but it was still considering the chain as a potential retail growth vehicle.
For the 12-week period ending March 30, Spartan reported net earnings of $7.7 million, down 26.6% from a 13-week fourth quarter in fiscal 2012. EBITDA adjusted for the extra week improved 16% as gross margins as a percent of sales improved 20 basis points to 22.4%.
Sales of $592.8 million were down 3.6%, compared to the year-ago quarter, but they improved 4.9% when excluding the extra week in the year-ago period. Comparable retail sales increased by 0.4%. Sales benefitted as a result of new retail stores and wholesale customers, and as a result of an earlier Easter holiday shifting sales from the first quarter to the fourth quarter.
Sales in the distribution segment increased 3.4% to $256.9 million in the quarter. The increase was primarily the result of new customer gains including the 12-store Chief Super Market chain, whose business transitioned to Spartan late in the quarter.
“These encouraging results reflect improvement across both our distribution and retail segments as we gained new customers, continued to refine our promotional and loyalty programs and benefitted from the early Easter holiday,” Dennis Eidson, president and chief executive officer, said.
For the fiscal year, net sales improved were down about 1%, to $2.61 billion, but improved 0.9% excluding sales from the 53rd week in 2012. Comps were down 0.5%, due to low inflation and a shift toward generic drugs. Net earnings of $27.4 million decreased 13.7%.
Eidson said Spartan was well-positioned to benefit from a gradual improving economy in Michigan, although the combination the Easter sales shift, continued shift to generic drugs and the cycling of a new store opening the Grand Rapids market would likely result in 2% negative comps during the current first quarter. The company is planning to re-banner 13 Glen’s stores to the Family Fare banner, complete 12 store remodels and open three Valu Land stores in fiscal 2014.
Eidson said Valu Land would likely be the company’s major engine of new store growth in years ahead, though its most recent openings in metro Detroit have seen “lumpiness” in their performance as Spartan fine-tunes the format.
“We knew going in [to Detroit] that it wasn’t going to be an easy task,” Eidson said. “It’s just proven more difficult than we thought.”