Sturken Straightens Course

December 9, 2005
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GRAND RAPIDS — There is a scene in the 2000 film “The Perfect Storm” that shows the fishing vessel Andrea Gail struggling its way along a trough between two enormous sea swells. As a sheer wall of churning water draws up before the craft, it’s not clear whether the boat will turn into the swell, floating unscathed to its crest, or be swept under, swallowed by the angry seas.

That’s kind of the position that Spartan Stores Inc. was in when Craig Sturken climbed aboard as the company’s new skipper in 2003. In the years before his arrival, the grocery wholesaler and retailer had expanded its retail presence dramatically with a number of acquisitions, including SeawayFoodTown, an Ohio grocery and drug retailer. In 2000, Spartan owned 47 retail stores. A year later, it had 127.

That rapid expansion came at a price. The company went from a $27 million profit in fiscal 2001 to a $122 million loss in fiscal 2003. Looking at a historical price chart for the Nasdaq-traded company, it’s clear to see that the company was taking on water. Before Sturken took over for then-CEO Jim Meyer, the share price had fallen from a high of more than $16 in 2001 to under $2 in mid-2003.

Sturken said the expansion that had seemed so promising early in the decade had quickly soured.

“When I got here, it was cancer and it had to go,” Sturken told the Business Journal. “So we immediately divested ourselves of that and other non-core business that was a distraction. And then we got focused on our core business, which is distribution, and the retail business that we own here in Michigan. And it’s really turned around. Our distribution is just fantastic. Our retailers are doing just great.”

By the beginning of 2005, Spartan’s retail holdings had been pared down to 75 stores. The company had consolidated and strengthened its distribution business. In addition to those logistical moves, Sturken implemented philosophical changes in the way the company did business. Those changes went straight to the bottom line. In fiscal 2004, the company showed a $6.7 million loss. In fiscal 2005 the company netted an $18.8 million profit.

Although he’s not ready to quit there, Sturken is happy to think of his success at Spartan as the high note to end a long career in the grocery business.

As a 16-year-old in Yalesville, Conn., he didn’t think of his job at the local grocery store as the start of a lifelong career. He just thought of it as a chance to earn some money to buy a car — and as a good excuse to avoid milking cows on the family farm. From there, Sturken’s “growing up in the industry” took him up and down the Eastern Seaboard for more than 30 years. After stints in New Jersey, Maine, Georgia and Canada, Sturken rose to become CEO of the Atlantic region for Great Atlantic & Pacific Tea Co. In that capacity, he worked to turn around a slumping region and to put a new strategic plan in place for the company. It was good practice for his next job.

Sturken looked at Spartan and saw stormy weather, but he also saw a challenge: Too many brands. Too many store banners. Too many stores, period. Too little respect. Too little planning. And that is where Sturken decided to focus his energy: planning.

“I’m the coach. I don’t play the plays. Most of the time I don’t even call the plays. I just try to influence what the players do,” said Sturken. “And, if I have the right players, we win.”

Putting together a winning game plan meant several big changes. Some of those changes have been practical: reducing the number of company-owned retail stores, reinventing the private-label grocery program to cut out waste and increase quality and profitability, investing in technology throughout the supply chain. But more important to Sturken were the philosophical changes. Spartan needed to rethink who its customers were.

“The company was primarily a wholesaler. They were really good at buying and selling cases of merchandise to other retailers, but they didn’t have a retail mindset,” Sturken said. “When I came here, the customer was the store owner. Today the customer is the consumer. That’s such a huge difference.”

With the changes he has implemented in place, the company is on much firmer financial footing. Sturken and his leadership team are still working to curb expenses and find new revenue streams. The company entered the gasoline market in 2005, and will continue to add gas stations to a handful of existing grocery locations each year. That business has been a runaway success.

“We get a sales increase in the supermarket when we put in gas. Automatic. Given,” said Sturken. “It’s a home run. I’m amazed at how well we’re doing with it.”

Even though Sturken’s tenure looks pretty impressive on paper, it has not been without its controversies. Most recently, rumors circulated throughout national media that Spartan was considering a buyout of Farmer Jack, the ailing Detroit-area grocery chain. Many reports mentioned Sturken’s experience with Farmer Jack’s parent company, Great Atlantic & Pacific Tea Co., as evidence that he was pushing for a merger.

The accounts turned out to be baseless. But, they brought out the renewed wrath of Loeb Partners, a New York equity firm that holds a major share of Spartan stock. The firm has publicly criticized Spartan’s leadership for failing to heed its advice — primarily to sell the company, in order for Loeb to turn a profit on its shares. Sturken understands the firm’s motivation to reap a return on its investment, but he also understands that his primary motivation is not to drive up the share price. It is to ensure the company’s long-term health.

“The people that I really care about are our retail customers, our employees, the people that come into our stores that we supply and operate, and, of course, the shareholders. I work for them. But I think that if I keep focused on the first part, the $10 stock price becomes $11 and $12, and the shareholders are happy.”

Sturken has always been driven by finding “the next big thing.” With each new level of responsibility and success he achieved, he has always looked beyond to the next step up. “It was always about the next job, and the next job. Every job I got, I’d just set my sights on the next job, then the next job.”

It appears that Sturken has patched the leaks and that Spartan Stores is now firmly afloat. The grumblings of Loeb Partners aside, shareholders seem to be happy. His track record would suggest that Sturken might be considering his next move. Where might that be?

“Oh, hey, I’m there. This is nirvana,” he said. “This is the last stop.”

At 62, the next step for him will much more likely involve grandkids and fishing than boardrooms and budget meetings. But, maybe … if the right offer were to come along?

“There isn’t enough money printed.”    

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