Spartan copes with sales decline
Elizabeth Slowik

The Great Recession is catching up with Spartan Stores.

In a Thursday conference call regarding results for the first quarter of fiscal 2011, President and CEO Dennis Eidson said the impact of unemployment in Michigan, an excruciatingly slow economic and retail deflation combined to push net consolidated sales down to $577.2 million compared to $596 million last year.

“In the prior year first quarter, we were minimally affected by these factors. It wasn’t until the third or fourth quarter that we began to realize the full impact of those influences,” Eidson said.

“This experience for us is only really four quarters old. We had been on a straight-up trajectory before that,” he told analysts. “W are pretty resilient in dealing with economic malaise in our geography.”

Both distribution and retail sales were down: distribution, $245.3 million in 2011 compared to $253.4 million in the previous fiscal year; and retail, $332 million compared to $342.7 million last year.

Adjusted first quarter operating earnings slipped from $14.1 million for the 12-week quarter in fiscal 2010 to $15.7 million in fiscal 2011. Diluted net earnings per share were 26 cents in the quarter that ended June 19, compared to 31 cents in last year’s first quarter.

“Comp stores sales are clearly not at satisfactory levels,” Eidson said.

He said that the D&W Fresh Market banner is performing at a higher level than the company’s other brand-name stores, Family Fare, Glen’s Markets and VG’s. He attributed that to D&W’s market position as an upscale “foodie” store catering to higher income customers who have been less impacted by unemployment.

Despite the slower distribution sales, thanks to the sluggish economy, company officials said they are seeing reduced costs from consolidating the warehouse in Byron Center and expect that trend to accelerate through fiscal 2011.

Eidson said the recovery has been slower than expected, and price deflation and unemployment has lasted longer than company leadership anticipated. But he said the company has weathered the worst and told analysts he expects slow improvement through the remainder of the fiscal year.

He said the company has implemented a full-service approach to deli and bakery products for the stores it owns and plans to roll that out to distribution customers.

Eidson said the launch of the new D&W Fresh Market store on East Beltline Avenue NE has gone well and generated positive customer feedback. A new Family Fare, under construction to replace a Felpausch store, is expected to open in the third quarter. A fuel center is under construction and several smaller remodeling are planned.

New openings from competing stores are slowing as well, he added.

Coupon redemptions are up 15 percent and the company is receiving valuable merchandising and marketing information from its “value card” program at Glen’s.