Spartan Planning Name Changes

August 3, 2007
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BYRON CENTER — Some of the former Felpausch Food Centers recently acquired by Spartan Stores will be brought under the Family Fare or D&W Fresh Market banners after renovations, Chairman, President & CEO Craig C. Sturken said in a conference call with analysts Thursday.

Spartan reported a strong first quarter for fiscal year 2008, with consolidated sales up 5.4 percent from last year’s first quarter. Net earnings bounced up by 142.3 percent to $6.5 million, from $2.7 million last year. Comparable store sales increased 3.6 percent, excluding fuel sales, while sales on the distribution side increased 2.4 percent, over the previous first quarter.

Sturken said he expects to see some growth in Spartan’s distribution business in the Detroit area, with the company’s customers picking up 14 stores in the wake of Farmer Jack’s departure. Spartan has a distribution center in Plymouth that serves about 100 stores, he said. Sturken also said the full impact of the distribution deal with Martin’s Super Markets in Indiana will materialize in fiscal 2008’s second and third quarters.

Increased business, particularly in frozen foods and produce, is leading to slight pressure on warehousing capacity, Sturken said, but the company is confident it could build additions or make operating changes if those are deemed necessary.

“We have a nice cushion in capacity in most categories we’re involved in,” Sturken said. “We’re getting a little tight in frozen foods, and produce a little, because our business in those categories is just booming. We have options available in the way of upgrades or productivity improvements.”

Sturken said Meijer Inc. is stepping up its competition with Wal-Mart. But Wal-Mart this year has used some tactics that Sturken called “out of character,” and he said he thinks the world’s largest retailer may back off on some of its trademark low prices.

“Wal-Mart this summer engaged in a feature program they never had before. In the month of June, they ran a Proctor & Gamble program. And on the Fourth of July, they had a very strong soft-drink program,” Sturken said. “It’s out of character for Wal-Mart: circulars on the street, glossy photos with feature pricing. Who knows what’s going to happen? Maybe we’ll watch them moderate their ‘every day’ pricing a little bit.

“It’s nothing we can’t work with, deal with or compete with. We’ve been successful with competing with both of those banners for some time.”

Spartan Stores is working through a retail upgrade effort and will embark on a similar plan for the 20 Felpausch stores over the next year, Sturken said. He said he expects Spartan will spend $500,000 to $2 million per store.

“We determined that once we upgrade the stores from a physical standpoint … then we will convert to a banner we think is appropriate for the demographic in the community,” Sturken said. “We feel the Family Fare banner and the D&W banner will come into play as we go forward with Felpausch. We don’t think it makes sense to put a new banner on a store that hasn’t been fixed from a physical standpoint.” 

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