Spartan Stores Sees Improvement

May 5, 2005
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GRAND RAPIDS — Spartan Stores Inc. marked its fifth consecutive quarter of improved earnings in the fourth quarter of fiscal 2005. Consolidated net sales for the quarter were $457.6 million, compared with $456.9 million for the same period a year ago.

Retail sales increased $900,000, despite the sale of the company’s single-store joint venture and lower sales at the Pharm stores. Distribution net sales for the quarter were consistent with last year at $258.8 million.

Fourth-quarter net earnings from operations were $5.3 million, or 25 cents per diluted share, compared $1.5 million in the fourth quarter of fiscal 2004. Net earnings for the quarter were $5.8 million, or 28 cents per diluted share, vs. net earnings of $1.7 million, or 9 cents per share.

Core supermarket operations showed fourth quarter sales growth despite a competitive environment in which four new supercenters opened in the past calendar year, noted Chairman, President and CEO Craig Sturken. Spartan opened one new in-store pharmacy and built a drive-through pharmacy at one of its retail supermarkets.

Sturken said the fourth quarter was the most profitable fourth quarter Spartan has had in three years and that performance was aided by a favorable tax adjustment and additional sales related to the shift in the Easter Holiday.

“Even excluding those items, we still had the most profitable fourth quarter in many years,” he added. “Our balance sheet is in the strongest position since we became a public company.”

Sturken attributed Spartan’s fourth quarter improvement to solid performance in its supermarket operations, the improving performance in its Pharm stores, better retail gross margins, and a more favorable cost structure due to the company’s “relentless emphasis” on cost containment and efficiency improvements. Lower interest expense as a result of refinancing efforts and debt reduction also helped boost profits, he said.

Net earnings for the fiscal year ended March 26 were $18.8 million, or 91 cents per diluted share, compared with a net loss of $6.7 million, or 33 cents per share, the year before. Fiscal 2005 net earnings included a loss from discontinued operation of $1 million.

Cash flow from operations was $60.6 million, an increase of more than 115 percent from the prior year’s level.

Sturken referred to fiscal 2005 as a year of “significant fundamental progress” for Spartan Stores, and said the company is pleased to have delivered on the strategic initiatives it announced at the end of fiscal 2004.

The operational and financial improvements are not temporary, but are fundamental and sustainable, he stressed.

“We have changed the very basics of how we conduct business as a grocery retailer and distributor,” Sturken said. “Our entire corporate culture has been transformed during the past several years into one today that is highly competent, has strong individual leadership, is able to interpret marketing intelligence and formulate effective business strategies, and most importantly, one that is focused on accountability.

“This renewed company-wide enthusiasm reaches well beyond our walls to our independent retail operators, our retail store customers, supplier partners and our shareholders. We are very proud of this achievement and are very confident that our energized work force will serve us well in this intensely competitive grocery environment.”    

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