Fresh Kitchen growing pains slow SpartanNash in Q2

A fresh food processing facility acquired by distributor SpartanNash early this year won’t provide the immediate returns initially anticipated, the company said Wednesday.

The Fresh Kitchen facility, acquired as part of SpartanNash’s Caito Foods acquisition, has begin limited production but “currently is not anticipated to meet original expectations for the current fiscal year, but is projected to be accretive in fiscal 2018,” SpartanNash said in quarterly earnings release late Wednesday.

The Fresh Kitchen is a $32 million, 118,000-square-foot facility in Indianapolis that will process, cook and package fresh protein-based foods and complete meals that was acquired by SpartanNash as part of its $217.5 million acquisition of Caito Foods.

The facility was expected to be fully operational in the first quarter of 2017, but SpartanNash said its integration and start up had been slower than anticipated.

That issue, along with anticipated challenges in the retail division, prompted SpartanNash to lower adjusted earnings expectation for the fiscal year from a previous range of $1.99 to $2.08 per share to $1.83 to $1.90 a share.

In the second quarter, which ended July 15, SpartanNash reported consolidated revenue of $1.9 billion, a 3.3% increase from the same period last year, and net earnings of $21 million, a 20.3% increase.

By segment, SpartanNash reported $941.6 million in sales through its food distribution business; $471 million in military sales; and $482 million in retail sales. Distribution sales increased by 14.8% in the quarter but were lower than analyst expectations of 20% sales growth.

In retail, sales were down by 3.9% on store closures and a 1.9% comparable-store sales decline, the company said.

Military sales were down by 6.8% on lower sales at military commissaries. SpartanNash, however, said it was anticipated better results in that segment as it ramps up private label sales to the channel and begins servicing a new facility in the Southwest U.S.