Supply, Retail Challenges Trigger SpartanNash Profit Warning

Although sales growth remains on track, challenges in the supply chain, fresh kitchen and retail operations, along with a fruit recall, will prevent distributor SpartanNash from meeting its goals for profits in the first quarter and fiscal year, the company said.

The Grand Rapids, Mich.-based company said preliminary results for the 16-week period that ended April 20 indicated that adjusted earnings per share of the period would be 23 cents to 24 cents per share versus an earlier projection of 33 to 37 cents. That will also effect Spartan’s annual earnings projections, now expected to be in the range of $1.20 to $1.50 per share, down from earlier projections of $1.70 to $1.80. Fiscal year EBITDA, which Spartan previously projected to total $210 million to $220 million, will now likely be in the $190 million to $205 million range.

Spartan is expected to report detailed first-quarter financials May 20.

“While we made significant progress against our strategic objectives, challenges in the supply chain, fresh kitchen and retail operations did not allow us to convert our top-line success to the bottom line,” said Dave Staples, SpartanNash’s president and CEO, in a statement. “This, along with the ongoing voluntary recall at our fresh cut-fruit operations, caused us to fall short of our original financial expectations in the first quarter and will impact our fiscal year 2019 outlook.”

Staples noted the quarterly challenges came despite hitting its sales targets, with the company  maintaining guidance of mid-single-digit revenue growth for the fiscal year. Preliminary first-quarter results indicate $2.5 billion in sales for the period, an increase of more than 6%, reflecting the newly acquired Martin’s Super Markets business in the retail segment, as well as growth in the distribution and military segments. Before the intercompany elimination of Martin’s sales, the distribution segment realized growth of 5.2%, the company said.

Spartan’s fresh kitchen operations are attracting new business, but the company is struggling to realize profitability there and has engaged outside production experts, Staples said.

The company’s Caito facility in Indianapolis issued a fresh-cut melon recall last month after the Food and Drug Administration said there was a salmonella risk for products processed there. SpartanNash said testing revealed no contamination at the facility, but production was suspended for more than two weeks. It expects to return to full production shortly.

Spartan’s retail division, in the meantime, “continues to navigate a tough environment,” Staples said, compounded in the last period by the timing of government SNAP benefit payments and the Easter holiday shift.