SpartanNash sees ongoing growth in Q2

Lifted in part by inflation, SpartanNash tallied strong sales gains across its business segments in its fiscal 2022 second quarter.

The grocery distributor also reported adjusted earnings per share (EPS) above the top end of Wall Street’s estimates.

For the 12-week quarter ended July 16, net sales totaled $2.27 billion, up 7.9% from $2.11 billion a year ago, SpartanNash said Thursday. That compared with a 3.6% dip in the 2021 quarter, when the company cycled big gains from pandemic-fueled demand a year earlier. SpartanNash noted that the 2022 quarter’s increase reflects sales upticks in all three of its business units, which were favorably impacted by inflation. Case volume also increased 3.3% within the military segment.

Net sales in food distribution, SpartanNash’s biggest business segment, advanced 5.9% to $1.12 billion in the second quarter from $1.06 billion in prior-year period, when sales were down 3.1%. The company said food distribution sales benefitted mainly from the inflationary impact on pricing.

In the grocery retail segment, net sales climbed 8.5% to $672.4 million from $620 million a year ago, when SpartanNash recorded a 1.8% decrease. The company attributed the gain primarily to inflationary pricing and increased share. Same-store sales grew 6.5% following a 2.7% decline in the 2021 quarter.

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Sales growth was strong in SpartanNash's retail business, with its corporate-owned supermarkets posting Q2 increases of 8.5% in net sales and 6.5% in comparable-store sales.

Currently, SpartanNash operates 148 corporate-owned supermarkets in the Midwest, mainly under the Family Fare, Martin’s Super Markets, D&W Fresh Market, VG’s Grocery and Dan’s Supermarket banners, up from 145 locations at the end of the first quarter but down from 155 stores a year ago.

Second-quarter 2022 military distribution net sales rose 12.4% to $483.2 million from $430.1 million in the 2021 quarter, when sales fell 7.1%. SpartanNash said the sales surge reflects inflationary pricing plus the segment’s higher case volume.

“We are pleased with the significant momentum in our business, as evidenced by our strong second quarter results, including impressive gains in sales and profits,” SpartanNash President and CEO Tony Sarsam said in a statement. “These results were driven by our continued turnaround in the military business and the margin improvements across our distribution businesses. With the launch of our ‘Merchandising Transformation’, we are doubling down on our efforts to maintain price competitiveness in this highly inflationary environment. We believe that when the end consumer wins, we all win.”

The Q2 performance built on gains in Q1, including increases of 4% in net sales, 2.8% in food distribution, 5.7% in retail (with comp-store sales up 7.2%) and 4.7% in the mility distribution business.

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At the bottom line in Q2 2002, GAAP net income came in at $5.1 million, or 14 cents per diluted share, compared with $16.8 million, or 47 cents per diluted share, a year earlier. Excluding adjustments of 52 cents per diluted share, including a LIFO expense of $17.8 million, adjusted net earnings (continuing operations) were $24.2 million, or 66 cents per diluted share, versus $21.5 million, or 60 cents per diluted share, in the 2021 quarter.

Analysts, on average, had projected adjusted EPS of 58 cents, with estimates ranging from 55 cents to 62 cents, according to Zacks Investment Research.

SpartanNash said it also posted a “significant increase” in adjusted EBITDA for the second quarter, up 13.7% to $61.8 million, from $54.4 million in the year-ago period.

The company, too, noted additional progress on the transformation of its supply chain, ending the quarter with a 9% improvement in throughput rate year over year.

“Due to our strong performance to date and the success of our ‘Supply Chain Transformation’, we are raising our full-year outlook for the second time this year,” Sarsam added. “We remain steadfastly committed to delivering strong results and creating sustainable shareholder value through ‘Our Winning Recipe’, which leverages our three core capabilities: people, operational excellence and insights that drive solutions.”

Looking ahead, SpartanNash has updated its fiscal 2022 guidance, raising its forecast at the top line. Full-year adjusted EPS was reaffirmed at $2.17 to $2.32. Analysts’ consensus estimate, prior to the second-quarter report, was for adjusted EPS of $2.26, with projections running from $2.19 to $2.34, according to Zacks.

Fiscal 2022 net sales now are projected at $9.3 billion to $9.6 billion, up from the prior outlook of $9 billion to $9.3 billion. Sales now are expected to rise by 4% to 7% for food distribution (up from 3% to 5%) and by 5% to 8% for military distribution (up from a 4% decrease to flat). Retail comparable-store sales stand to grow 4% to 7%, up from the previous outlook of 1% to 3%.

Adjusted EBITDA for the year is projected slightly higher at $227 million to $240 million, compared with the earlier estimate of $224 million to $239 million.

The company also reaffirmed its long-term financial goals. By 2025, SpartanNash said it expects to surpass $10 billion in net sales, which would signal a gain of 12% from fiscal 2021. Adjusted EBITDA over that time span is projected to reach $300 million, which would be an increase of at least 40% from fiscal 2021.