Spartans Net Earnings Have Tripled

October 11, 2004
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GRAND RAPIDS — Spartan Stores’ operating and net earnings are at their highest levels in three years.

Consolidated net sales for fiscal 2005’s second quarter ended Sept. 11 were $486.7 million, compared with $491.4 million in the year ago quarter.

Comparable store sales increased 1.4 percent, marking the sixth consecutive quarter of comparable store sales growth.

Operating earnings increased more than 80 percent to $13.2 million, up from $7.3 million in fiscal 2004’s second quarter.

Second quarter net earnings of $7 million, or 34 cents per diluted share, were more than three times higher than last year’s second quarter net earnings.

Retail net sales increased 7 percent to $232.2 million, while distribution net sales decreased 2.4 percent to $254.5 million, which the company attributed to the loss of two distributors and the shift of the fall private label promotion to the third quarter.

Chairman, President and CEO Craig Sturken said he was pleased to announce another quarter of “solid” financial progress.

“Our second quarter net earnings exceeded last year’s results by approximately 300 percent, the highest level reported in the past three years,” he said. “Our performance improvement is the result of our continued focus on basic operational execution and our consumer-centric business strategy…”

Sturken said comparable store sales at the company’s Pharm stores continue to be “below expectations,” primarily due to an increase in direct mail order prescription fulfillment from a United Auto Workers mandate. The mandate also resulted in lower sales at Spartan’s in-store supermarket pharmacies, he added. Spartan is in the process of adding more convenient services, such as in-store pharmacies.

Retail and distribution operating profit growth was “very strong” in the second quarter, Sturken noted. Retail operating profits increased more than 60 percent during the second quarter, compared to the corresponding quarter last year.

He said the company expects additional year-over-year retail profit improvements for the second half of fiscal 2005.

Spartan has completed store remodels and/or merchandise resets at eight stores and is on schedule to complete 10 to 13 stores by year’s end, Sturken said. By the end of fiscal 2005, the company will have completed remodels and/or resets at more than 30 of it retail supermarkets.

During the second quarter Spartan implemented Phase I of its specialty goods distribution program that Sturken said will allow the company to gain additional distribution centers.

During the quarter the company also introduced its Spartan brand private label to the ice cream and yogurt categories. Sturken said preliminary sales have been “very favorable” and that he expects sales in both categories to increase as the products are made available to Spartan independent retail operators over the next six months.

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