Economy keeps diners at home
Spartan CEO happy

October 16, 2008
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Sales of canning supplies are up 45 percent over last year at Spartan Stores Inc. and trends continue to point toward consumers eating at home more often instead of dining out, Dennis Eidson, Spartan president & CEO, said in a conference call today.

“I didn’t know that many consumers still knew how to can, but apparently so,” said Eidson, whose role as CEO, announced in August, became effective Wednesday.

A strong recent sale of private label goods and interest in items such as frozen entrees also point to changing consumer tastes in the face of the current financial crisis, Eidson said in responding to an analyst’s question.

“One of the favorables in this climate is we believe the shift to food at home is working in our favor,” Eidson added.

Research shows consumers also think eating at home is healthier, and Eidson said Spartan is likely to exploit that more in marketing and merchandising in the future.

Eidson revealed that distribution customer VG’s Food & Pharmacy approached Spartan due to ill health of its CEO & President Lisa Van Gilder, and that resulted in the Byron Center company’s agreement to purchase the 17-store southeastern Michigan chain. VG’s also has 15 in-store pharmacies, but no fuel stores, an avenue Eidson said Spartan may explore.

Spartan’s Securities and Exchange Commission filing reported a purchase price of $85 million.

VG’s stores pepper suburban Flint as well as 10 northern suburbs of Detroit, stretching from Howell to Marine City and south to Sterling Heights. The acquisition is Spartan’s third in recent years and gives the Byron Center public company its first retail foothold in Southeast Michigan.

Spartan serves many distribution customers in the area, including some who purchased Farmer Jack’s stores as they exited the market.

Eidson said he expects the VG’s stores to require less capital improvements than the D&W and Felpausch acquisitions, noting that the owners put $30 million into the stores over the past five years.

“The stores are terrific, by the way,” he told analysts. “It’s just a premier organization with great boxes. This is right down the middle of our strategy. We talked about making acquisitions in adjacent marketplaces. Our prototype store is 48,000 square feet; these stores are 47,000 square feet…This is really a gem for us. There is lots and lots of upside.”

Spartan expects two to three remodels and construction of one new D&W Fresh Market and a fuel center during the remainder of the 2009 fiscal year. The company also expects substantial completion during the third quarter of improvements to its warehouse and distribution system.

Spartan reported a 4.8 percent increase in net sales for the 12-week fiscal 2009 second quarter which ended Sept. 13. Second quarter operating earnings were up by 16.9 percent to a record $22.5 million.

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