Rising CEO Promises To Continue Spartan Growth

August 13, 2008
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GRAND RAPIDS — For investors who joined the party back in 2003 when Spartan Stores Inc. went public, Chairman and CEO Craig Sturken said at Wednesday’s annual shareholders’ meeting, $100 has grown to nearly $900.

“We’re proud of it,” said Sturken, who passes his CEO mantel on to Dennis Eidson, currently president and COO, later this year. “For those of you who were here six years ago, it was a little different story.”

Eidson promised a continued commitment to Spartan’s “profitable growth” strategy as fiscal 2009 continues to unfold, including interest in additional retail acquisitions in contiguous markets, capital investment on both the retail and distribution sides, and adding fuel centers to buoy supermarket sales.

CFO Dave Staples reported that two of last year’s major advances grew sales: the acquisition of the 20-store Felpausch chain, which included two fuel centers and three convenience stores, nudged retail sales up by $211 million; the addition of Martin’s Super Markets of Indiana as a distribution customer brought in $88 million, and another $21 million is anticipated for fiscal year 2009. Spartan gained another 15 distribution customers during 2008.

He also said Spartan’s distribution revenue increased by $40 million when its customers snapped up 15 to 17 former Farmer Jack’s stores in southeast Michigan, and could bring in as much as $31 million in growth in 2009.

The company owns 84 supermarkets: 34 Glen’s Markets, 27 Family Fare Supermarkets, 11 D&W Fresh Markets, 12 Felpausch Food Centers and 18 freestanding fuel/convenience stores. Last year, Spartan sold its pharmacy chain called The Pharm.

Spartan intends to remodel Felpausch stores in Albion, Dowagiac, Paw Paw and Williamston during fiscal 2009.

Eidson said the economy is impacting consumer spending habits, but competition with Michigan’s 164 supercenters — including fourfold growth in the number of Wal-Marts — is Spartan’s major challenge. The number of supercenters in the state has grown by about 70 percent in five years: Meijer, from 78 to 92 stores since March 2003; Wal-Mart, from 12 to 65; and seven Super K-Marts, which remained the same.

“Despite the challenge in square footage, our numbers have grown quite nicely in that time period,” Eidson said. “Our offer is far more value-added. We believe conventional supermarkets offer an alternative to the big boxes. We’re focused on convenience and service, access and product that’s meaningful to the consumer in the marketplace. It’s all about putting the right store in the right market at the right time.”

On the distribution side, private label, Spartan and Full Circle, continues to be a strong point, while fresh products are the topic of a new sales initiative, Eidson said. He said replacing the entire fleet of tractors has resulted in an 8 percent fuel-use savings. A $7 million capital investment is on tap, including more than $2 million for a new racking system for grocery distribution and a new software system, both of which are expected to result in more efficiently loaded trucks and deliveries.

“If there is one pinch point today, frozen is probably it,” he noted.

Eidson said that in the 2009 fiscal year, the Hastings store will be relocated, a new D&W will be built and five fuel centers added. He said on average, fuel centers contributed about 5 percent to same-store sales. Over the next three years, Spartan plans on 10 new or replacement stores and 10 to 15 new fuel centers.

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