Spartan Stores Comes Up Roses

June 25, 2007
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BYRON CENTER — Spartan Stores has been blossoming this spring with the acquisition of the Felpausch grocery chain, favorable reviews from analysts sending the stock price to a 52-week high, and the possibility of growing its distribution business in Southeast Michigan and Indiana.

“We are very pleased with our business progress this past fiscal year and are continuing forward with the growth phase of our business plan,” Spartan Stores Chairman, President and CEO Craig Sturken stated in a May press release regarding company financials. “Although we are just beginning to execute this phase of our strategy, we have already achieved considerable success.”

The Felpausch chain, based in Hastings, re-opened June 15 after a temporary closure to convert to Spartan standards, with new cash registers, new shopping carts and restocked shelves. Spartan expected to spend $5 million for promotions, new marketing plans and grand re-openings, plus $1 million in employee training costs. The acquisition included Felpausch’s 20 supermarkets, two fuel centers and nine in-store pharmacies.

“Including our anticipated acquisition of 20 retail stores from G&R Felpausch Co., we expect to increase our store base 43 percent, to 107 stores from the 75 stores we operated at the end of fiscal 2004,” Sturken continued. “Our recently announced, expanded distribution relationship with Martin's Super Markets should provide more than $100 million in incremental sales volume. This relationship is our first major expansion into Indiana.”

The 7,300-employee grocery distributor owns stores under the flags of Family Fare Supermarkets, Glen’s Market, D&W Fresh Markets and The Pharm, as well as the Felpausch name, which it plans to continue using. In a Securities and Exchange Commission filing for the fiscal year ending March 31, Spartan Stores stated it expects the Felpausch acquisition to add $100 million to annual consolidated sales.

The company also indicated that it plans to continue refurbishing its stores, with 76 completed over four years and 10 more in line for fiscal 2008. Construction of one to two new stores and as many as six new fuel centers could pump capital expenditures as high as $40 million.

Competition remains intense and the SEC filing noted that over three years, 13 supercenters opened in markets that host Spartan-owned stores, and three more are expected in fiscal 2008.

But Wal-Mart’s announcement that it intends to scale back its number of new stores by 25 percent was one factor that led an analyst to upgrade her view on Spartan Stores, helping boost the stock price as high as $33.03, after trading for as little as just over $12 within the past 52 weeks. Spartan Stores is on the NASDAQ exchange.

The Associated Press reported on Forbes.com that Friedman Billings Ramsey analyst Karen Short bumped her rating for Spartan Stores from “Market Perform” to “Outperform” based on the Wal-Mart announcement. Short also said Spartan Stores should be able to pass along the higher cost of goods to customers of its distribution side.

Great Atlantic & Pacific Tea Co., of New Jersey, is selling the Detroit area’s 66 Farmer Jack’s stores. Speculation in news reports named Spartan Stores as a possible buyer for some of the waning Farmer Jack’s stores. Kroger was expected to buy a significant number of the Farmer Jack’s stores, which would put it neck and neck with Meijer Inc. for market share leader in the Detroit area.

Spartan Stores spokeswoman Jeanne Norcross was unavailable for comment. 

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