SpartanNash Retail Comps Spiked in Q1

SpartanNash saw another quarter of robust retail sales growth in the opening months of fiscal 2022, with the company affirming last month's preliminary reporting of 7.2% comp sales growth, excluding fuel, in the first fiscal quarter of the year. Net sales at SpartanNash's 145 supermarkets rose 5.7% to $781.3 million in the quarter.

In addition, the Grand Rapids, Mich.-based retailer and wholesaler saw its gross-profit rate improve to 16.3% of net sales in the quarter vs. 15.7% of net sales in the first quarter of fiscal 2021. That growth, SpartanNash reported, was driven by improvements in margin rates within the company's food distribution and military segments.

"Our first-quarter results reflect the significant momentum underway at SpartanNash," company President and CEO Tony Sarsam said in SpartanNash's June 2 earnings release for the quarter ending April 23. During the quarter, Sarsam noted, the company hit the lower end of its full-year cost savings target of $15 million to $30 million. That ahead-of-schedule performance now has prompted the company to raise its cost savings guidance to $25 million to $35 million by year's end, driven in large part by gains in supply-chain efficiency and network optimization.     

The healthy retail sales growth in the first fiscal quarter, coming on the heels of 7.3% comp sales growth in the fourth quarter of fiscal 2021, is a win for SpartanNash as it seeks to fend off a board challenge from an activist investor group critical of the company's portfolio management. Macellum Advisors and Ancora Holdings Group are aiming to replace three SpartanNash board members in a proxy vote at the company's annual shareholders meeting on June 9.

SpartanNash's military segment, which struggled throughout much of 2020 and 2021 amid base closures, port delays and other supply-chain disruptions, saw net sales climb 4.7% to $611.5 million in the first quarter and operating earnings come in at $1.4 million, compared with a loss of $5.1 million in the prior-year quarter.

Net sales for the company's distribution segment, its largest business, rose 2.8% to $1.37 billion from $1.33 billion in first-quarter 2021.

"They're great numbers," Sarsam said in a call with analysts. On the retail and distribution fronts in particular, "We're delighted in where we are right now," he added.

Inflation was the biggest contributor to sales growth in the quarter, according to the company, but Sarsam and CFO Jason Monaco noted that SpartanNash's Family Fare, Martin's Super Markets and D&W Fresh Market banners were seeing increased visits from consumers turning to SpartanNash banners to meet immediate grocery needs throughout the week. "We're winning with those consumers that are loyal to our stores, but we’re also winning with fill-in shoppers," Monaco said. 

Owned brands, too, saw major momentum during the quarter: Sales of private-label products grew at about twice the rate of sales of other assortments, Monaco said, and healthy inventory levels meant consumers could find the staples they were looking for at the value pricing they sought.

Amid inflation levels not seen in 40 years, with food-at-home prices in the U.S. rising 10.8% year over year in April, retail stores saw "a little bit of flight to private label" in the first quarter, Sarsam said. But, he added, "We're also seeing really strong growth in fresh"—a higher-margin part of the store. Consumers are keen to save money on center-store items and everyday staples, Sarsam said, but they still have an appetite for small indulgences—fresh flowers, for example—and they remain eager to "explore continued joys of living through food at home."