Spartan Enjoys Strong Quarter

August 7, 2006
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GRAND RAPIDS — Spartan Stores net sales for the first quarter of 2007 reached a five-year high of $528 million, up from $459.3 million in the first quarter of last year. First quarter net earnings were $2.7 million, or 12 cents per diluted share, the same as 2006’s first quarter.

In the retail segment, first quarter sales increased 24.5 percent to $252.2 million, up from $202.6 million in the year-ago quarter. First quarter sales in the distribution segment increased 7.5 percent to $275.9 million from $256.7 million a year ago.

Craig Sturken, Spartan chairman, president and CEO, attributed the growth in net sales to incremental sales from acquired D&WFoodCenters, new distribution business, fuel center sales and Easter holiday sales.

During the first quarter, the company began integrating D&W, and eliminated overlapping capacity in its West Michigan market by closing two Family Fare retail stores. It also completed the transfer of its central bakery operation in Grand Rapids to its Family Fare stores.

Operating earnings in the quarter included a $4.5 million pretax asset impairment and exit costs related to the closure of the two Family Fares and the central bakery operation. Despite that, operating earnings were $6.9 million versus $6 million in the year-ago period.

Sturken said the integration of Spartan’s D&W acquisition was its top priority during the quarter. The company re-branded six of the acquired stores to the Family Fare brand. He said the effort required extensive re-merchandising, cleaning and minor remodeling at each store location.

“We are pleased with the initial sales performance of these stores,” Sturken remarked. “We will continue to focus on improving the operations of these stores to bring them in line with our target performance and profit goals.”

In the quarter just passed, Spartan refocused its D&W promotional programs to emphasize a commitment to fresh products and to strengthen the D&W Fresh Markets brand, an effort Sturken expects will improve the growth potential of those stores.

Sturken said that during fiscal 2006, there were a record number of competitive superstore openings in Spartan’s markets, but that the company doesn’t expect any additional super-center openings in it markets during the remainder of this fiscal year.

The outlook for the remainder of the fiscal year is continued sales growth in the distribution segment due to new stores added to Spartan’s distribution base in the previous fiscal year, and to the company’s improved private label and perishable product offerings, and because many of Spartan’s customers are also performing well in the highly competitive retail environment, said Executive Vice President and CFO David Staples.

In the retail segment, Staples said the company expects retail comparable store sales to be in the low- to mid-single digits as it gains sales from the opening of more fuel centers and positions the company to take advantage of competitive developments in its markets.

“These favorable trends will be somewhat mitigated by the impact on consumer behavior from higher energy costs and the uncertain economic growth outlook,” he noted.

Sturken said Spartan expects capital expenditures for fiscal 2007 to range from $30 million to $35 million, depreciation and amortization to range from $22 million to $25 million, and interest expense of approximately $13 million to $14 million.    

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