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Diving certificate:
- SpartanNash reported a decline in net sales and comparable store sales in the second fiscal quarter of 2024, with both the company’s retail and wholesale businesses losing ground for the third consecutive quarter.
- Net sales in the second quarter fell 3.5% from the year-ago period to about $2.2 billion, while comparable store sales declined 2.5%. Net income fell to 34 cents per diluted share, weighed down by lower unit volumes and higher restructuring and impairment charges.
- SpartanNash still felt the impact of its declining wholesale business with Amazon during the quarter, but the company expects that downward trend to moderate going forward, Chief Financial Officer Jason Monaco said Thursday during a quarterly earnings call.
Diving insight:
Although SpartanNash has faced numerous obstacles that have impacted its performance, the company has recently made significant progress in its efforts to revive its business, CEO Tony Sarsam said during the conference call.
SpartanNash has paid particular attention to what he calls “transformation in commodity retail,” Sarsam said, with the goal of mitigating trends such as slowing inflation and falling food spending that are plaguing the grocery retail industry.
SpartanNash is “focusing on what we can control and not standing still in this environment,” Sarsam said. “Although the headwinds are stronger than expected, our long-term strategic initiatives are helping us offset the difficult market conditions.”
The company’s wholesale division, which accounts for more than two-thirds of its revenue, reported net sales of about $1.5 billion in the second quarter, down nearly 5 percent from a year ago. Net sales for SpartanNash’s retail division fell less than 1 percent to $676 million.
SpartanNash’s strategy is to use data on commodity prices and other aspects of the supply chain to keep costs low for its customers, Sarsam said. SpartanNash is also putting more emphasis on private labels and is “very pleased” with the early performance of Finest Reserve, the premium line the company launched in February, he said.
Shoppers “are looking for pleasure. And if we can offer pleasure at a better price than we think, we win overall. That’s the story, and it works,” Sarsam said, adding that the company had calculated that penetration of its own brands could increase by three percentage points.
SpartanNash’s revamped approach to merchandising also extends to ongoing store modernization efforts. According to Sarsam, this project “leverages the learnings from the success of our enhanced category planning, remodeling program and recent retail acquisitions.”
The company expects double-digit growth from the initiative, with a focus on higher volumes, lower prices and an increased focus on fresh food, he said, noting that the company has cut prices on more than 6,000 items in remodeled stores.
In addition, Sarsam said SpartanNash’s business distributing food to cafeterias and distribution points on U.S. military bases grew for the tenth consecutive quarter in the second quarter, which he said helped offset the decline in business with Amazon.
Sarsam said SpartanNash’s acquisition of Wisconsin-based grocer Metcalfe’s Market in April is also bearing fruit for the company. SpartanNash has begun supplying groceries to Metcalfe’s, rather than the third-party distributor it previously worked with, and expects the chain to generate $100 million in annual sales, he said.
“I’m actually very optimistic about the M&A outlook going forward,” Sarsam said. “I think the last year has been a little slow in terms of opportunities, for reasons that everyone knows well in terms of capital markets. But I think we’ll see more… we’re seeing a lot of different types of opportunities, and I’m optimistic.”
