Spartan Income Jumps; Sales Up Too

GRAND RAPIDS, Mich. — Spartan Stores here said last week its ability to offer consistent value to consumers and to reduce operating expenses helped boost financial results for the year and fourth quarter that ended March 26.

Gradual improvements in the Michigan economy also helped, Dennis Eidson, president and chief executive officer, told analysts during a conference call.

Net income for the quarter rose 140.2% to $7.8 million, while sales increased 2.3% to $571.5 million. Comparable sales in the retail segment fell 0.9%, though it was the fourth consecutive quarter of improving comps, the company pointed out.

For the fiscal year, net earnings rose 26.4% to $32.3 million, including the impact of a $1.8 million after-tax restructuring charge; sales for the year fell 0.7% to $2.6 billion.

Distribution segment sales increased 1.9% in the quarter and fell 0.2% for the year, while retail sales increased 2.6% in the quarter and dropped 1.2% for the year.

Ajay Jain, a senior analyst with Hapoalim Securities, New York, said the results reflect solid execution by Spartan across its distribution and retail segments.

“The combination of an improvement of 10 basis points in gross margin and sequential improvement of 350 basis points in non-fuel ID sales offers further validation that regional economic pressures have bottomed out,” he said, “[and] going forward, underlying retail sales trends will continue to improve.”

He also noted that, as an integrated retailer and wholesaler, “Spartan is very well positioned to leverage advantages in procurement in an inflationary environment.”

David M. Staples, executive vice president and chief financial officer, told analysts the company's earnings were enhanced by its warehouse consolidation initiative in 2010, which focused on cost controls and increased operating efficiencies.

He said the drop in sales for the year resulted from the loss of $13 million related to stores that were closed or sold during the prior year and to the competitive environment — including multiple supercenter openings over the last two years — which were partially offset by higher fuel prices and a single new store.

Spartan expects sales trends to continue to improve — with positive comparable store sales — primarily in the second half of the year, Staples said, citing an improving Michigan economy.

Eidson said Spartan's key initiatives in the current fiscal year include ongoing expansion of its corporate brand program, with 300 new items projected; the rollout of its loyalty card program from a single banner to the remainder of its corporate stores; a focus on fresh excellence; and continued emphasis on providing health and wellness solutions.

“And we continue to see improving growth opportunities in our existing markets and adjacent states for new customer development or acquisitions,” he added.

Q4 RESULTS