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Spartan Looks for Gains in '11

Operating in perhaps the most economically depressed region of the country, Spartan Stores here last week reported a 6% decline in comparable-store sales for its third fiscal quarter, and said comps could fall another 2%, to -8%, in the fourth fiscal quarter. By sometime in the company's next fiscal year, however, which begins at the end of next month, Spartan said it expects sales

GRAND RAPIDS, Mich. — Operating in perhaps the most economically depressed region of the country, Spartan Stores here last week reported a 6% decline in comparable-store sales for its third fiscal quarter, and said comps could fall another 2%, to -8%, in the fourth fiscal quarter.

By sometime in the company's next fiscal year, however, which begins at the end of next month, Spartan said it expects sales and earnings to improve.

“I believe there are good reasons to be optimistic as more favorable business trends begin to develop late in fiscal 2011,” said Dennis Eidson, president and chief executive officer, in a conference call with analysts. Product-price deflation, for example, is expected to begin trending positive, and the company will also cycle several competitive openings. “We also believe that Michigan's unemployment will begin to stabilize,” he added.

The company's previously reported warehouse consolidation is expected to drive benefits in fiscal 2011, as is a sharp reduction in capital expenditures.

Karen Short, a New York-based analyst with BMO Capital Markets, said she “continues to believe the company is extremely well-managed,” and said she thinks fiscal 2011 “will prove to be a slightly better year than management is forecasting.”

Net income for the 16-week third quarter, which ended Jan. 2, fell 40%, to about $5 million, although sales were up slightly for the period, to $786.9 million. The increase reflects the acquisition of the VG's Food and Pharmacy chain and the opening of additional fuel centers, partially offset by the lower comps.