Spartan Stores a bright spot in challenging economy

January 12, 2009
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In a year when everything seemed to be down, Spartan Stores Inc. kept looking up.

The Byron Center grocery distributor and supermarket operator in 2008 followed the goals that management set several years ago when Chairman Craig Sturken walked through the front-office doors: thoughtful, controlled expansion through retail acquisitions, and growth in distribution to customers in areas contiguous to those it already serves.

The one-two punch delivered actual growth in stock price over 2008 of 3 percent and allowed the company to consistently pay investors quarterly dividends.

Those factors, plus Spartan’s commitment to job retention in Michigan and to the local community through food pantry donations, support for a new YMCA in Wyoming, pharmacy initiatives and growing its business at home, allowed the company to sashay onto the Business Journal’s list of top 10 newsmakers for 2008.

That’s not to say everything is perfect. Spartan has encountered some local turbulence in its plans to build in Plainfield Township and at Metro Health Village in Wyoming. The company has announced construction plans for Grand Rapids Township as well as the eastern edge of downtown Grand Rapids, which have yet to come to fruition. And earlier this year, Spartan jettisoned The Pharm, a small chain of discount pharmacies mostly in Ohio. But overall, Spartan has been more or less thriving the past 12 months, at a time when the state has been struggling for years and the national economy is the worst it’s been in a generation.

Spartan, which started its existence decades ago as a cooperative and has been publicly traded since 2000, began the year by announcing a consolidated net sales increase of 15 percent and adjusted net earnings increase of 33 percent for fiscal 2008’s third quarter. It then announced a quarterly dividend of 5 cents per common share.

A company contingent accompanied Sturken, then also CEO, to New York City, where he celebrated five years of leadership at Spartan by ringing the bell to open NASDAQ trading on March 3.

The company sold 12 of its 14 The Pharm stores to Rite Aid for $12.8 million, releasing the other two stores in separate deals.

Operating earnings for the fourth quarter of fiscal 2008 increased by nearly 19 percent. For fiscal 2008, the company said, consolidated net sales rose 12.3 percent over fiscal 2007 to $2.5 million, and operating earnings went up by 16.6 percent, to $61.6 million. Much of the growth was attributed to the 2007 acquisition of the Felpausch chain. The first quarter of fiscal 2009 showed positive movement of 12.8 percent in consolidated net sales and 26 percent in consolidated net earnings. That report was followed by another 5-cent-per-share dividend for shareholders.

In October, Spartan announced it would buy the VG’s Food Center and VG’s Pharmacy chain, which has 17 stores stretching from the Flint area east into the northern suburbs of Detroit, for $85 million. The family-owned chain includes 15 pharmacies and is a major distribution customer. Spartan now owns 101 supermarkets under five banners.

In the same week, Spartan said that Dennis Eidson would become president and CEO under the company’s previously announced succession plan. Sturken remains as executive chairman.

For the second quarter of fiscal 2009, operating earnings grew 16.9 percent, double-digit growth for the 11th consecutive quarter, to $22.5 million. Consolidated net sales increased by 4.8 percent, breaking the $600 million mark.

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