Spartan Reports Lower 3Q Sales

March 21, 2002
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GRAND RAPIDS — Spartan Stores sales dipped by more than 6 percent for fiscal 2002’s third quarter to $1 billion.

Same-store sales for its retail grocery segment were more than 5 percent lower for the quarter.

Results for the quarter were below original expectations, a shortfall due to lower than anticipated sales volume in both the company’s retail and distribution operations, said Chairman, President and CEO James Meyer.

David Staples, executive vice president and CFO, blamed the decline on increased competition in the Ohio market and general economic conditions experienced by Spartan stores in the Michigan market.

Gross margin for the quarter was flat at 16.6 percent compared with the year ago period. Net earnings from continuing operations were at break even, compared to $7 million in the third quarter last year.

Spartan’s other retail markets also were down slightly for the quarter because of unfavorable winter weather conditions in the northern Michigan market and a weak manufacturing environment in the western Michigan market, Staples said.

The company’s retail segment reported a $5.4 million loss for the quarter, compared with earnings of $2.3 million for the same period last year.

Quarterly sales for its grocery distribution segment were down nearly 17 percent compared to a year ago.

Retail grocery sales for the quarter, however, increased 1.3 percent to $439 million, a hike attributed to sales from Spartan’s recently acquired Prevo’s stores.

The earnings shortfall this past quarter doesn’t diminish Spartan’s growth opportunities, Meyer said

“We are firmly committed to the Ohio market and to improving our store performance there. We will continue to pursue the value strategy in that market,” he said. The strategy includes physical facilities improvements to some stores in the Ohio market.

Spartan has reorganized its procurement group along perishable and non-perishable lines and aligned its replenishment buyers and category managers to provide more structure to each category, as well as stronger focus on inventory control, Meyer noted.

The company also is working on efficiency improvements to streamline its distribution network, an objective that began with the recent labor negotiations. The operational changes allowed under the new labor agreement should begin to show results late in the fourth quarter, he said.

Another focus is on controlling corporate overhead, as exemplified by the company’s recent 5 percent reduction in corporate staff. Meyer said the move is expected to save the company $2 million to $2.5 million annually.

Under its new store development program, the company intends to build four new stores a year.

This spring, Spartan will begin construction of two new stores in West Michigan, including a 52,000-square-foot store in what Meyer referred to as a densely populated and underserved area of Grand Rapids.

In the just-passed quarter the company completed six store-remodeling projects in the western Michigan market and two in the Ohio market.

Work on the remaining eight stores scheduled for renovation in the Ohio market will begin late in the fourth quarter or early in the first quarter.           

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